I’ve got a top spec pad I live at in the centre of Leeds. I’m heading abroad and put it on the market at £500k (same value both agents) but only had one viewing in a month and they loved it but they have a property to sell. I’m desperate to start a new life after I lost my wife so I don’t want to wait for a protracted sale. I have been approached by a guy that wants to buy but can’t get a mortgage right now but can in 12 months. He’s a sole trader. He can get a healthy deposit of £50k and is looking to rent for 12 months at £2000/month. I don’t need the money immediately I just want to get to Spain so the rental situation works and the delay of monies is less of an issue. The downside is he wants to pay £380k which hurts but I just want to move on. The upside is he can move in quickly and I get on the plane.
I guess my question is, is there a way of setting this up securely so I will get the remaining funds in 12 months? The place has been fully redeveloped and is showroom finish. In 12 months it may be less so therefore having to put it back on the market would be less attractive if something went wrong. Do I exchange contracts?
Hi Colin. Thanks for your reply. What are your fears? Simply that he won’t come up with the cash? I assume if set up correctly should he default his deposit would be at risk?
how does he know 100 % he can get a mortgage? What if after renting he offers even less than now? It can take a year to get a tenant out.. Is 50k enough of a deposit to get a mortgage of £330 k?. I have been a sole trader for 50 years and know the hoops you have to go thru to get a mortgage on your home If renting at 2k he needs to earn 6 k a month Does he?
Thanks Karl, you might have missed in the OP that flats can take 6-9 months to get over the line even for cash buyers due to the prolonged legal process. I don’t want to leave the property empty that long and I want to get on a plane tomorrow. The solution might be far from ideal but one thing it does provide is a quick exit and I recieve £24k in rent which I would have to forgo on a sale. Hope it now makes more sense to you.
Hi Colin, you’re right in that at the moment its just been a chat and I’m mulling it over and testing the water before we get into the due diligence. I believe he earns in excess of £6k a month and he currently pays a rent not too far off this at the moment. I don’t and he doesn’t know if he can get a mortgage. He is building his history up by the day. I suppose the worst possible outcome is he doesn’t and decides to stay and as you rightly say I have to go through the courts to evict him but even in the worst possible outcome I have £74k in the bank to play with.
If you are willing to accept that sort of discount to market value I would have thought you would be better considering a company such as we buy any house or similar. I’ve no experience of using them but understand they will pay around 85% of market value and can complete in less than a week.
Renting it out brings lots of responsibilities it sounds like you’d rather avoid and 2k a month isn’t much for a 500k property after allowing for maintenance and management costs.
There are all kinds of problems with the notion of rent now, buy later, not least being the seller has far fewer rights if the Renters doesn’t go ahead with the purchase. Get some proper legal advice.
welcome. once you have exchanged contracts including specifying a completion date, they are legally committed to the purchase, even if it is in a year’s time, and will have put down a sizeable deposit [usually 10%] at exchange as well. However he can’t rent your property to others till he actually owns it in a year’s time. 2000pm or 24k pa is a relatively low yield. Sounds like renting it to him out in the hope of him then being able to buy in a year’s time is a relative longshot - if he earns 6k a month his income is 72k pa and even if he buys at 380k with a deposit of 50k he’s borrowing 330k so more than 4.5 x income with a relatively low deposit. You are betting on his business being successful enough over next year that he builds up a credit history so somebody is willing to lend to him and will have all the work of renting out meanwhile [2k pcm doesnt mean you will have 24k at end remember you still have to pay uk tax on uk income plus maintenance service charges etc]
In your situation I would a) get some other agents advice on value [two isnt many and some will say higher to try to get the business] as well as your current agents’ views on whether to hold steady or to reduce price b) consider selling by auction with a fixed timescale to completion [usually 56 days?], 10% deposit and reserve price of say 400k -if the real value is 500k you should sell easily c) consider - which is more risky, a sole trader who isnt ready to proceed with the purchase, and might or might not be able to get a mortgage, or somebody who actually can get the funds through sale of their property. “The average time from an accepted offer to completion for a house sale in the UK is around 12 weeks, but this can be as quick as 6-8 weeks for chain-free sales or extend to 12+ weeks or more for properties with a property chain. “. So even with the people who need to sell you’ll get the 500k quicker d) check for both potential purchasers i) annual income ii) what assets they are using to fund the purchase, whether they will need a mortgage if so what size iii) proposed time frame iii) why they are purchasing the property - if they are willing to rent for now possible they then keep you hanging on till it suits them to buy?
I would also get quotes from some of the various companies who will buy properties for cash at a discount from the market value [google ‘we buy any house’] as they might be willing to pay you more than 380k now