Advice Needed From Private Landlords Please!

[guiser]

I'm in a terrible quandry here and wonder if anyone can help me sort out my thought process!

 

My mother recently passed away leaving myself and my sister a half share each in a 3 bed semi in the south east, estimated value around £200,000.

 

My sister is mortgaged up to the hilt and can't wait to get her hands on a lump sum, I can't help but think I'd be missing a trick if we let the property go.

 

What I'd really like to do is buy her half share and let the property out - I'm fairly confident I could get around £850 per month from it.

A local landlord has offered us £175,000 for the house, and my sister has indicated she might be happy with that, as it's not on the market yet and we'd escape Estate Agent fees, which leads me to believe that she'd accept under £90,000 for her share.

 

 

The problems - as I see them - are

1. I am a council tenant.

2. Having been mum's primary carer, I currently only work part time and earn around £12,500 per annum.

3. I'm 48, so a 25 year mortgage isn't an option.

 

Is this worth pursuing? And if so, what should I be looking for?

[Steve__M]

I think you would find it very difficult to get a mortgage for the amount you need in the current environment. I am not sure whether buy-to-let mortgage sellers would require you to own your own property - they may.

 

If you were able to sufficiently increase your salary, the amount of rent would be sufficient to cover the interest on a 90K mortgage (normally they want rent to be at least 1.3 times the interest on the mortgage).

 

You would need to have some additional savings in place to deal with maintenance issues or months when the house is empty - factor this in to the amount you need for mortgage.

 

I don't think your age matters. You would be looking to get an interest-only mortgage with the nominal plan of selling the house if you had to pay off the mortgage.

 

I assume you've thought about just using the money to buy your own place?

 

Don't accept a low offer just to escape agent's fees (which you may be able to negotiate down in the current market). Get some quotes and make your own valuation based on the current market. You can always keep your buyer in reserve by insisting to the agent that commission is not payable if you choose to sell to him.

[quisling]

Thanks for the reply.

I had of course thought about using the capital as a deposit to purchase my council house, but I'd need at least a £65 - 70k mortgage for that, and without the rental income coming in, I'd be hard pressed to do that, even if anyone was prepared to lend it to me.

 

Having said that, if I was able to do that, and sit tight for three years, I could get planning permission to build a new house attached to my current one (plenty of examples of that already on my estate) and really do well out of it.

 

It's just SO damned annoying that it feels like all this is JUST beyond my financial reach.

 

[xoAmyox]

To be honest, if this was me, I'd be hunting for more hours/a 2nd job ASAP to boost my income. It does seem unlikely that with a higher income you'd be granted a BTL without owning your property first. However, buying your council house sounds like a great idea, and you could sit on your capital from the sale of this house in order to do your build.

Can I ask why it is you'd have to wait the 3 years before attempting this?

[guiser]

You're right of course, and I have asked to go full time at work, but as my company have already made redundancies this year, I'm lucky to have what I've got there.

I have applied for other full time jobs, but so far, no luck, though it's early days as mum only died last month.

 

If I was able to buy my council house, I'd be eligible for the full £38,000 discount available in this area, but if I sold all or part of the property within three years, I'd have to pay all or part of that discount back to the local authority.

[xoAmyox]

Is extending the property (therefore creating a separate dwelling) in order to rent it out, deemed as breaching those rules?

[guiser]

You know what?

I hadn't thought of it that way round.

I'd thought of buying this house, getting planning permission for another, then selling up.

 

You've raised an interesting point which I don't know the answer to.

 

Thanks for confusing me even further!!

 

[xoAmyox]

haha! your very welcome!

 

Without trying to be too personal, if you have a partner, have you considered a joint mortgage, then your wage in addition to theirs may well be acceptable to a mortgage company?

[guiser]

No, I don't have a partner - I did once, but he's the reason I ended up in a council house with a couple of young kids.

 

 

Anyway, the flaw in your plan is that I could never fund the mortgage on this house plus find the money to build another.

Back to the drawing board!

 

I think I'll just take the money and have a damn good time on it - it feels like it just falls short of being enough for me to do anything worthwhile with it - unless I can hike my income by a big bit.

[xoAmyox]

My thinking is, that if you can get the first mortgage on your current property with the smallest deposit possible. Then the remaining would be sufficient/nearly sufficient for say a 2 bed build, i've done a (very) quick google, and the indications suggest that once you have the land a 2 bed property of average size has a build cost of between 65-85k. Then you have a nice rental return coming in after

[MrShed]

In the current climate, I think you would struggle to get a mortgage even on the council property unfortunately, given your salary and especially (unfortunately) your age.

 

Whats your credit history like?