sell your house and rent it back?

[budwieser]

Evening all,
Has anyone had any dealings with companies who buy your house and rent it back to you at all and if so, what were your experiences with them?
Any recommendations as we are looking into doing this
for a few different reasons.

[WHISTLED]

NO BLOODY WAY!!!

I appreciate you may have personal reasons for doing so but they are not the way to go. Firstly they have been featured on programmes like watch dog and as they are un-regulated and can (and do) evict you as any land lord can with the appropriate steps. They can also increase the rent to way beyond your current mortgage effectively forcing you out.

They are a business so in many circumstances its not in their interest to keep you on.

[on in an hour!]

Originally Posted by WHISTLED

NO BLOODY WAY!!!

I appreciate you may have personal reasons for doing so but they are not the way to go. Firstly they have been featured on programmes like watch dog and as they are un-regulated and can (and do) evict you as any land lord can with the appropriate steps. They can also increase the rent to way beyond your current mortgage effectively forcing you out.

They are a business so in many circumstances its not in their interest to keep you on.

theres something on panorama now about the buy to let market,not exactly what you asked but anything that veers from the norm seems a bit dodgy to me

[WHISTLED]

Thats more about the property value scam, well known in some parts of London.

[Rob]

Steer very clear of the sell and lease back route. Once sold, you become a shorthold tenant. You have no security of tenure. Many have found, to their cost that the "company" who purchases your freehold fails to keep up the mortgage repayment, the mortgage company reposesses, leaving the occupier homeless.

---------- Post added at 21:35 ---------- Previous post was at 21:25 ----------

Buy to let of overvalued portfolio of houses is a different kettle of fish, and equally a minefield of problems that could in many areas devalue the flats of individual owners, especially in larger blocks.

Very simply, an investor "bought" a flat, or worse a number of flats, in a block. Often the developer offers and incentive to the investor, such as 5% deposit paid (or indeed a higher discount), yet the price declared to the valuer is the asking amount, with these discounts hidden. The valuer sees all the other flats in the block selling for these asking prices, and based on that market evidence confirms the mortgage valuation. The mortgage company advances say a 95% of value amount, when in fact they've paid out 100% of the value, such that the investor has little or no equity. Often the investor's stability is linked to other flats in his portfolio so one mortgage's income theoretically pays for any shortfall. This all works OK whilst capital values in property were rising, such that when sold a couple of years later, stamp duty and other costs of sale can be met from the profit. In a slow, or potentially devaluing market, it's a disaster since if the letting income doesn't cover the outgoings including mortgage (frequently it doesn't), the investor stops paying mortgages, and that leads to repossessions or forced sales. As a block of flats starts to get a few of these, then every owner in that area loses out, exacerbating the value issues.

Over the last few years there have been many large town centre, and some not quite so central schemes, some with literally hundreds of flats. These are all at risk.

---------- Post added at 21:42 ---------- Previous post was at 21:35 ----------

Another very neat ploy I came across recently involved an investment company "buying" an entire block of some 100+ flats from the developer, off plan. The investor company was paying £xxx for each flat, the developer's price, less some sort of discount for making the developer's job easier. The investor then looks to resell the flats to individual investors for buy to let purposes (imagine a large block of flats only occupied by tenants, I can't see it remaining pristine for long). The company offers a guaranteed tenant and rental income for the first two years, after which the individual leaseholder can do what they want i.e sell, relet or whatever. Only problem, the reselling company was asking £xxx plus around £15%. In other words the reselling company didn't need to find a tenant, or indeed only needed a low rental value one, to enable it to fund the rental payments due to the individual investor. It took some time to work out what was actually going on. The only clue it was wrong was the local flat pricing levels were some much lower in the general area than those being expected for this block. I just hope not too many small investors have been caught out.

[nobbytucker1]

Yes, some sensible advice here already. I'm a Chartered Surveyor and confirm, don't do it.

Banks are playing hardball with mortgage defaults, and I'm hearing some awful stories. If you can't sell and have the bank after re-possessing you? I'm not so far from you and may be able to help, IM me.

[lostandconfused]

Also, there's nothing stopping them doubling the rent a few years down the line.
IMHO if your struggling for money, i would sell the house and move to a smaller/cheaper one. Its a lot of hassle, but at least you still have a home that you own at the end of it

[TheNorm]

Here's an idea...

Many people have a lot of money "locked up" in property. Some of these people need some of that money, and for one reason or another can't borrow it.

So, why don't mortgage lenders offer to remortgage your home with repayments spread over 999 years (instead of 25)? The monthly repayment will be much smaller. The property will still be used as collateral. The borrower can take out an insurance policy to repay the loan early if necessary. Everyone would win.

What is the flaw in this logic?

[lostandconfused]

Originally Posted by TheNorm

Here's an idea...

Many people have a lot of money "locked up" in property. Some of these people need some of that money, and for one reason or another can't borrow it.

So, why don't mortgage lenders offer to remortgage your home with repayments spread over 999 years (instead of 25)? The monthly repayment will be much smaller. The property will still be used as collateral. The borrower can take out an insurance policy to repay the loan early if necessary. Everyone would win.

What is the flaw in this logic?

that the intrest accrued over a millenium would be rather high,

[TheNorm]

Originally Posted by lostandconfused

that the intrest accrued over a millenium would be rather high,

Yes, the total repayment might be a brazillion pounds, but so what? The money is needed now, and the monthly repayments will be much less.

[southwell]

Plus you can still pay back whatever you want a month extra, well up to a limit, mines £500.
Maybe a small loan is better? Im not too clued up on problems regarding money problems with mortgages.

[Rob]

Ultimately there can be a catch in many of these ideas to release equity in the property. The only secure way is to downsize your property.

A mortgage is only possible if you are receiving an income allowing you to meet repayments. Thus once a mortgagee reaches retirement few companies will be willing to continue a loan. On that basis even 50 year mortgage terms are frequently impractical, let alone 999 years.

A lot of people have fallen foul of schemes that were offered by some of the major banks. Effectively they bought a share in the property, and might own say 1/2 of it, releasing that equity. As and when the property is subsequently sold the bank takes that 1/2 share. But crucially they also get a half share of the change in property value. That's fine if prices have risen only a small amount, but for many prperty has risen by extraordiary levels. If the homeowner needs to sell, maybe they need to move to more suitable accommodation for their health, they find themselves now without sufficient funds to be able to afford to sell and still buy the property they need.

[Hugh]

Originally Posted by TheNorm

Yes, the total repayment might be a brazillion pounds, but so what? The money is needed now, and the monthly repayments will be much less.

Because, I would think, the banks don't want to be property owners - they just want it as security for a short/medium term loan.

What quite a few banks will do is, if you are having problems, they will extend your mortgage for 5-10 years - it ups the total interest, but lowers the monthly payments for the time you are having issues. You can then reduce the term when the fiscal issues are solved.

[tweetypie/8]

Originally Posted by Rob

Steer very clear of the sell and lease back route. Once sold, you become a shorthold tenant. You have no security of tenure. Many have found, to their cost that the "company" who purchases your freehold fails to keep up the mortgage repayment, the mortgage company reposesses, leaving the occupier homeless.

---------- Post added at 21:35 ---------- Previous post was at 21:25 ----------

Buy to let of overvalued portfolio of houses is a different kettle of fish, and equally a minefield of problems that could in many areas devalue the flats of individual owners, especially in larger blocks.

Very simply, an investor "bought" a flat, or worse a number of flats, in a block. Often the developer offers and incentive to the investor, such as 5% deposit paid (or indeed a higher discount), yet the price declared to the valuer is the asking amount, with these discounts hidden. The valuer sees all the other flats in the block selling for these asking prices, and based on that market evidence confirms the mortgage valuation. The mortgage company advances say a 95% of value amount, when in fact they've paid out 100% of the value, such that the investor has little or no equity. Often the investor's stability is linked to other flats in his portfolio so one mortgage's income theoretically pays for any shortfall. This all works OK whilst capital values in property were rising, such that when sold a couple of years later, stamp duty and other costs of sale can be met from the profit. In a slow, or potentially devaluing market, it's a disaster since if the letting income doesn't cover the outgoings including mortgage (frequently it doesn't), the investor stops paying mortgages, and that leads to repossessions or forced sales. As a block of flats starts to get a few of these, then every owner in that area loses out, exacerbating the value issues.

Over the last few years there have been many large town centre, and some not quite so central schemes, some with literally hundreds of flats. These are all at risk.

---------- Post added at 21:42 ---------- Previous post was at 21:35 ----------

Another very neat ploy I came across recently involved an investment company "buying" an entire block of some 100+ flats from the developer, off plan. The investor company was paying £xxx for each flat, the developer's price, less some sort of discount for making the developer's job easier. The investor then looks to resell the flats to individual investors for buy to let purposes (imagine a large block of flats only occupied by tenants, I can't see it remaining pristine for long). The company offers a guaranteed tenant and rental income for the first two years, after which the individual leaseholder can do what they want i.e sell, relet or whatever. Only problem, the reselling company was asking £xxx plus around £15%. In other words the reselling company didn't need to find a tenant, or indeed only needed a low rental value one, to enable it to fund the rental payments due to the individual investor. It took some time to work out what was actually going on. The only clue it was wrong was the local flat pricing levels were some much lower in the general area than those being expected for this block. I just hope not too many small investors have been caught out.

sound, sound , advice rob.

---------- Post added at 17:47 ---------- Previous post was at 17:45 ----------

Originally Posted by nobbytucker1

Yes, some sensible advice here already. I'm a Chartered Surveyor and confirm, don't do it.

Banks are playing hardball with mortgage defaults, and I'm hearing some awful stories. If you can't sell and have the bank after re-possessing you? I'm not so far from you and may be able to help, IM me.

nice to see guys like you on the forum handing out good advice.

[piggy]

corn-beef?........no.......spam.....YES!!