BTL with friend?
Discussion
Hi,
Mentioned to my friend that my fixed rate comes to an end in April. £148k remaining, house worth £230k.
He suggested I increase mortgage to 168k and use the extra £20k along with £20k from him to get a BTL on interest only with him. Could get a 1 bed flat around here for £90k to £120k which would rent for around £650 per month
I know the pitfalls of having no tenant etc and the hassle of running a business but the mortgage repayments would be no more than £150 a month between us.
It would put an extra £100 payment on top of my mortgage each month but I would get more than that back from the BTL,
Am I missing something here?
Mentioned to my friend that my fixed rate comes to an end in April. £148k remaining, house worth £230k.
He suggested I increase mortgage to 168k and use the extra £20k along with £20k from him to get a BTL on interest only with him. Could get a 1 bed flat around here for £90k to £120k which would rent for around £650 per month
I know the pitfalls of having no tenant etc and the hassle of running a business but the mortgage repayments would be no more than £150 a month between us.
It would put an extra £100 payment on top of my mortgage each month but I would get more than that back from the BTL,
Am I missing something here?
markiii said:
if the maths stands up great, don't forget the extra 3% stamp duty. Then consider the pitfalls of business with a friend and what if one of you wants their money out at any point?
Hi, yes we already spoke about having an agreement in place if one person wanted to sell or various scenarios.I guess I just wanted another opinion on it.
Badda said:
I'd say the maths is slightly wrong somewhere. A £90k one bedder won't rent for £650 so either purchase price is too low or expected rent too high. Also check the arrangement fee on the mortgage...
Which area?
£90k would probably rent for £550 - £600 or £120k would probably rent for £575 - £650.Which area?
It's Bristol / South Glos
Don’t forget the tax plus any management fee plus things like council tax that you both will have to find if you have a long period without a tenant which is unlikely but make sure you are both fully aware of costs before hand.
I’d be inclined to set up a separate account for the house to cover insurances, gas safety check, repairs, management fee etc... run it as a business and at the end of the year see what is left and split it 50/50.
I’d be inclined to set up a separate account for the house to cover insurances, gas safety check, repairs, management fee etc... run it as a business and at the end of the year see what is left and split it 50/50.
Firstly you need to be aware of costs. It isn't just not having a tenant, but also refurbishment between tenants, refreshing the kitchen, bathroom, carpets every few years, general wear and tear and so on. One common mistake is thinking your "profit" can be taken out as income, when in reality a lot of it will be needed a few years down the line in order to keep your house rentable.
The other thing to look at is how much have the properties you're interested in gone up in value over the last decade. You can see historic sale prices on Rightmove. You'll be surprised at how little some have appreciated, especially flats and small one-bed houses. Don't fall into the trap of assuming something at the bottom end of the market appreciates at the same rate as the average.
The other thing to look at is how much have the properties you're interested in gone up in value over the last decade. You can see historic sale prices on Rightmove. You'll be surprised at how little some have appreciated, especially flats and small one-bed houses. Don't fall into the trap of assuming something at the bottom end of the market appreciates at the same rate as the average.
Rollin said:
Muzzer79 said:
Personally, I have a rule never to do business with friends or family.
I have enough friends, enough family and enough colleagues - I don't need to mix those pots as it only ever ends in tears.
IMO
I agree.I have enough friends, enough family and enough colleagues - I don't need to mix those pots as it only ever ends in tears.
IMO
How can you possibly build and run a decent business with a partner without counting them as your friend especially if you have common interests outside the business?
Muzzer79 said:
Personally, I have a rule never to do business with friends or family.
I have enough friends, enough family and enough colleagues - I don't need to mix those pots as it only ever ends in tears.
IMO
Possibly a reflection on you then if it always ends in tears? You seem to be the commonality. I have enough friends, enough family and enough colleagues - I don't need to mix those pots as it only ever ends in tears.
IMO
selmahoose said:
Rollin said:
Muzzer79 said:
Personally, I have a rule never to do business with friends or family.
I have enough friends, enough family and enough colleagues - I don't need to mix those pots as it only ever ends in tears.
IMO
I agree.I have enough friends, enough family and enough colleagues - I don't need to mix those pots as it only ever ends in tears.
IMO
How can you possibly build and run a decent business with a partner without counting them as your friend especially if you have common interests outside the business?
I am not sure how you could be in business with someone you do not have such a relationship with.
Gassing Station | Finance | Top of Page | What's New | My Stuff