BTL - with a twist. Long term and tenant funding refurb.
Discussion
Not sure if best in here, Homes or SPL.
I have inherited my childhood home following the death of my father. He'd lived there almost half a century and perhaps fairly typically it needs a good £25k+ throwing at it to bring it into the modern world. I've no real need to do this, and could sell "as-is" but also don't have any specific plans for the money should I do so.
An acquaintance has put a proposal to me. He likes the property, can see the potential and would happily live there the rest of his days (lets say 10-20 years) but doesn't want to buy as he wants to spend his money (no kids to leave it to).
The suggestion he has made (which is similar to an approach I considered) is (figures are just approximate):
- he would fund the refurbishment - say £25k
- he would rent at £200 less than the market rate for a period of 10 years (with regular rent reviews to align with the market rate)
- after this period he would then pay full market rent
- if he/we uncover some major issues the discounted period could be extended, or if the refurb cost is less then the discounted period could be less
I am comfortable that he can afford it and would do a good job of the refurb.
We are both agreed that we need a sensible contract in place that sets out what happens should something go wrong - be it on his side (non-payment/whatever) but also what would happen in the event I met an untimely end to ensure he would remain there for a set period or my estate would refund his outlay should it happen next year for example.
I am also not sure if there are any wider implications compared to a "normal" AST.
Potential pitfalls and suggestions of where to go for advice would be appreciated.
I have inherited my childhood home following the death of my father. He'd lived there almost half a century and perhaps fairly typically it needs a good £25k+ throwing at it to bring it into the modern world. I've no real need to do this, and could sell "as-is" but also don't have any specific plans for the money should I do so.
An acquaintance has put a proposal to me. He likes the property, can see the potential and would happily live there the rest of his days (lets say 10-20 years) but doesn't want to buy as he wants to spend his money (no kids to leave it to).
The suggestion he has made (which is similar to an approach I considered) is (figures are just approximate):
- he would fund the refurbishment - say £25k
- he would rent at £200 less than the market rate for a period of 10 years (with regular rent reviews to align with the market rate)
- after this period he would then pay full market rent
- if he/we uncover some major issues the discounted period could be extended, or if the refurb cost is less then the discounted period could be less
I am comfortable that he can afford it and would do a good job of the refurb.
We are both agreed that we need a sensible contract in place that sets out what happens should something go wrong - be it on his side (non-payment/whatever) but also what would happen in the event I met an untimely end to ensure he would remain there for a set period or my estate would refund his outlay should it happen next year for example.
I am also not sure if there are any wider implications compared to a "normal" AST.
Potential pitfalls and suggestions of where to go for advice would be appreciated.
DogRough said:
Emeye said:
Get it refurbished yourself, then rent to him as a normal tenant on a standard basis - why over complicate it?
This ! Why go to all the complication of having a long term tenancy? What happens if circumstances change and you need to sell? I am sure your solicitor would advise you not to touch this with a bargepole.So many what ifs and whys !!!
For the sake of 25K (which you could borrow on the property if you needed to), just do the refurb and rent it out at market rent on a normal tenancy agreement.
Looks like I'm the only one who can see the positives here!
If you refurb and rent it at market value, you've got ongoing maintenance/repair/upkeep issues to constantly deal with. You'll be renting to unknown possibly multiple tenants, there's plenty of threads/tv shows about tenants not paying/ripping off landlords. In 10 years you might have 10 or more different tenants with the associated void periods etc. Advantage is you can liquidate/ sell it fairly quickly if needed.
Rent it to your acquaintance, he sorts the renovations and has to live with any problems/issues, he pays you £200 less than you could get if you did it yourself but after 10 or so years you're financially the same as if you'd refurbed it, little to no stress, no void periods, assuming you're happy he'll pay the rent. Only downside is you cant liquidate/sell for the foreseeable future.
Personally, if you're happy he'll be a good tenant, I'd jump at the chance to almost guarantee 10-15 years worth of rent even if it is at a reduced rate.
If you refurb and rent it at market value, you've got ongoing maintenance/repair/upkeep issues to constantly deal with. You'll be renting to unknown possibly multiple tenants, there's plenty of threads/tv shows about tenants not paying/ripping off landlords. In 10 years you might have 10 or more different tenants with the associated void periods etc. Advantage is you can liquidate/ sell it fairly quickly if needed.
Rent it to your acquaintance, he sorts the renovations and has to live with any problems/issues, he pays you £200 less than you could get if you did it yourself but after 10 or so years you're financially the same as if you'd refurbed it, little to no stress, no void periods, assuming you're happy he'll pay the rent. Only downside is you cant liquidate/sell for the foreseeable future.
Personally, if you're happy he'll be a good tenant, I'd jump at the chance to almost guarantee 10-15 years worth of rent even if it is at a reduced rate.
TallPaul said:
Looks like I'm the only one who can see the positives here!
If you refurb and rent it at market value, you've got ongoing maintenance/repair/upkeep issues to constantly deal with. You'll be renting to unknown possibly multiple tenants, there's plenty of threads/tv shows about tenants not paying/ripping off landlords. In 10 years you might have 10 or more different tenants with the associated void periods etc. Advantage is you can liquidate/ sell it fairly quickly if needed.
Rent it to your acquaintance, he sorts the renovations and has to live with any problems/issues, he pays you £200 less than you could get if you did it yourself but after 10 or so years you're financially the same as if you'd refurbed it, little to no stress, no void periods, assuming you're happy he'll pay the rent. Only downside is you cant liquidate/sell for the foreseeable future.
Personally, if you're happy he'll be a good tenant, I'd jump at the chance to almost guarantee 10-15 years worth of rent even if it is at a reduced rate.
I would suggest you (and the OP) don't understand tenancy law, don't have much if any experience in this sphere and are unaware of the obligations on landlords and the direction tenancy law is going with the rights that tenants have and their protection. The moto of Don't dapple in things that you don't understand spring to mind If you refurb and rent it at market value, you've got ongoing maintenance/repair/upkeep issues to constantly deal with. You'll be renting to unknown possibly multiple tenants, there's plenty of threads/tv shows about tenants not paying/ripping off landlords. In 10 years you might have 10 or more different tenants with the associated void periods etc. Advantage is you can liquidate/ sell it fairly quickly if needed.
Rent it to your acquaintance, he sorts the renovations and has to live with any problems/issues, he pays you £200 less than you could get if you did it yourself but after 10 or so years you're financially the same as if you'd refurbed it, little to no stress, no void periods, assuming you're happy he'll pay the rent. Only downside is you cant liquidate/sell for the foreseeable future.
Personally, if you're happy he'll be a good tenant, I'd jump at the chance to almost guarantee 10-15 years worth of rent even if it is at a reduced rate.
As a letting agent (and solicitor prior) that deals with 300 odd lets a year and has (hopefully) a good grasp of tenancy law what the op has said fills me with dread. As other posters have said its a bad idea.
firstly you are likely to be creating more then an AST, if you fek up the AST or it is simply invalid then you may be creating a legal interest in the property for the occupier because of the work/contributions.
Its already complicated ie you have to be very precise with the paperwork to issue a correct AST that wont turn around and bite you, its also getting more complex to recover a property via a s21 notice and the growing paperwork that goes with that. you then also have the deregulation act and other aspects of tenant protection which gives tenants many rights and councils rights in relation to repairs and maintenance and can void s21 notices and prevent eviction.
What the OP is suggesting I don't think any solicitor would draw up or recommend and no (decent) Letting agent would (or should)touch with a barge pole. The actual agreement o be written would be complex and non standard with many drafting pitfalls and serious consequences of drafting it wrong and then open to challenge in court if one partys circumstances change.
Keep it simple do the work required to rent out the property correctly, use a decent letting agent to let it out, protecting your legal interests in the property is the 1st consideration. We have had a number of tenants in properties for 11+ years some 18+ years - a decent letting agent will help ensure the letting is successful.
Edited by superlightr on Wednesday 19th July 21:16
Edited by superlightr on Wednesday 19th July 21:16
Edited by superlightr on Wednesday 19th July 21:17
Edited by superlightr on Wednesday 19th July 21:19
superlightr said:
I would suggest you (and the OP) don't understand tenancy law and the obligations on landlords and the direction tenancy law is going with the rights that tenants have. Don't dapple in things that you don't understand.
As a letting agent that deals with 300 odd lets a year and has (hopefully) a good grasp of tenancy law what the op has said fills me with dread. As other posters have said its a bad idea.
firstly you are likely to be creating more then an AST, if you fek up the AST or it is simply invalid then you may be creating a legal interest in the property for the occupier because of the work/contributions.
Its already complicated ie you have to be very precise with the paperwork to issue a correct AST that wont turn around and bite you, its also getting more complex to recover a property via a s21 notice and the growing paperwork that goes with that. you then also have the deregulation act and other aspects of tenant protection which gives tenants many rights and councils rights in relation to repairs and maintenance and can void s21 notices and prevent eviction.
What the OP is suggesting I don't think any solicitor ( and I used to work as one) would draw up or recommend and no (decent) Letting agent would (or should)touch with a barge pole.
Keep it simple do the work required to rent out the property correctly, use a decent letting agent to let it out, protecting your legal interests in the property is the 1st consideration. We have had a number of tenants in properties for 11+ years some 18+ years - a decent letting agent will help ensure the letting is successful.
This is the answer, accurate and complete. To ignore the above would be unwise.As a letting agent that deals with 300 odd lets a year and has (hopefully) a good grasp of tenancy law what the op has said fills me with dread. As other posters have said its a bad idea.
firstly you are likely to be creating more then an AST, if you fek up the AST or it is simply invalid then you may be creating a legal interest in the property for the occupier because of the work/contributions.
Its already complicated ie you have to be very precise with the paperwork to issue a correct AST that wont turn around and bite you, its also getting more complex to recover a property via a s21 notice and the growing paperwork that goes with that. you then also have the deregulation act and other aspects of tenant protection which gives tenants many rights and councils rights in relation to repairs and maintenance and can void s21 notices and prevent eviction.
What the OP is suggesting I don't think any solicitor ( and I used to work as one) would draw up or recommend and no (decent) Letting agent would (or should)touch with a barge pole.
Keep it simple do the work required to rent out the property correctly, use a decent letting agent to let it out, protecting your legal interests in the property is the 1st consideration. We have had a number of tenants in properties for 11+ years some 18+ years - a decent letting agent will help ensure the letting is successful.
I wouldnt agree to the tenant fronting the 25k refurb.
However I have 2 properties that I rent out well below market rent in return they decorate and maintain the property.
No fees as we have agreement between us one has been renting for 12 years the other 5
I still maintain the right to sell and the properties are never empty and I dont have any worries.
However I have 2 properties that I rent out well below market rent in return they decorate and maintain the property.
No fees as we have agreement between us one has been renting for 12 years the other 5
I still maintain the right to sell and the properties are never empty and I dont have any worries.
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