Rent-to-buy

[Mark19800_0]

So I'm currently renting my property and am looking into the possibility of selling. I contacted a couple of estate agents through Zoopla and one got back to me.

When I discussed my situation, he said had I considered approaching my tennants with the rent to buys scheme.

Apparently the tennants would pay me a deposit, agree a value with the landlord, and carry on renting the house for a determined time scale and pay an amount on top of the usual rental as way of topping up thier deposit. At the end of the period they have the option to buy the house at the originally agreed price with the deposit deducted from it.

If the value goes up above the agreed value, they keep the difference, same case if they improve the property.

In my case, my tennant is a builder who was made bankrupt and therefore cannot get a mortgage for the next two years. I think he might be interested as he can improve the property over the next two years and then sell it, after he has paid me. I don't mind this as I'm now living in France and would like to sell the property. I've been renting it for 4 years and the house could do with some TLC anyway.

My only fear is that being a builder, he's thinking I would accept a stupidly low figure to get rid and then he could make even more.

What are your thoughts on this scheme? Has anyone on here done it?

Mark

[stephenh]

Have you taken legal and valuation advice on this scheme? If not I suggest you do so. It isn't any area for "amateurs" to get into unless they understand all the implications, and find the (informed) risks acceptable.

It could work, but lots of pitfalls unless you really know what you are doing.

[mark.anson]

You could be entering a legal minefield and a lot of hassle. What if the builder (an ex?bankrupt dont forget) and he starts to pay an increased rent in effect towards the deposit.

He then starts to maintain the property at his expense eg new windows doors etc etc. At the point the final "sale" is due to take place he pulls out or cant raise the cash BUT he has a civil claim on the property because of the work hes done.

Im no expert and I would seek legal advice if you still want to go ahead, but my advice would be to put it up for sale on the open market and get the best price you can. Sure you can give the tenant first refusal and even knock him some money off but that would be as far as I would go.

[pistonbroke]

capital gains Tax Alert      

[Norman Verona]

Mark, I assume your letting, the builder is renting. Took me a while to understand your situation.

I assume the tennant has a 6 month lease.

I would do as suggested above and sell it for what you can get. Sell it as an empty property. Don't worry about the tennant, he can sort himself out.

If you've owned it for more than 4 years you should still get more for it than you paid.

And if it's your only UK property there is no CGT involved.

[samcooke]

QUOTE

In my case, my tennant is a builder who was made bankrupt and therefore cannot get a mortgage for the next two years

I fear it may be a little more than 2 years before lenders will consider a bankrupt nowadays, even if he does get himself discharged.

It's a government scheme, so there are no legal risks, you just need to understand the process fully :

http://www.direct.gov.uk/en...._170934

The most important thing is that the tenant isn't obliged to buy, but you are obliged to sell.