flat: hand it ovedr rent

Discussion in 'Finance, Property, Law' started by sirbhp, Aug 9, 2012.

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  1. sirbhp

    sirbhp LE Book Reviewer

    Help needed folks please:

    mate of mine owns ( on mortgage) a flat in a three flat house conversion.

    A regular firm of estate agents have proposed that he pays one third of the fees to buy the freehold , they own the other two flats 85 year leases all around .

    The also propose that they give him 38 grand to move out and buy another place in the area.

    He will still own the flat,they will rent it to the uni students and send him x part of the rent .

    On paper he gets the deposit to buy sat a 130 grand place , and he gets rent from the flat he still owns.

  2. sounds dodgy as.............

    tell him to get offer in writing and see a solicitor. The saying "you don't get something for nothing" springs to mind
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  3. Clue? They're Estate Agents. I'd put more money on Maggie going back to No.10. In a bikini.
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  4. It's definitely not unheard of, although Poppy is absolutely right to advise getting it in writing and checked by a decent property lawyer.

    To make sense for the estate agent is would need to be a in a strong student rental area and be a straightforward conversion to multiple occupancy. There is a far bigger profit margin for a whole building over flats within a building, plus it will be a shite living environment for your mate.

    Student flats and houses are very big business, I deal with quite a few student landlords who have several 10 to 12 bed houses that bring in £80 to £100 a week per room, so on a 10 bed place that's about £900 a week or £3600 per month per property. A couple of landlords I work for have 10 student houses on the go, so £10k plus income per month, for generally shitty condition boxes. Costs are minimal so basically money for feck all effort, and they are the single tightest group of customers I deal with.

    The catch I suppose is that your mate will be getting a far lower proportion of the rent than the agents, plus he will become liable for a share of the buildings maintenance, which could be thousands per year if major things need doing.
  5. just for starters, they will be the majority shareholder in the freehold because they will have two thirds to his one third. So, they get to call the shots on any decisions about the future of the freehold of the property.

    They will also stitch the rental income up to get back their 38 grand "gift". They will probably get their money back over 4 or 5 years.

    Your mate becomes a minority shareholder at their mercy and he will probably be more than happy to sell his flat at a knock down price to them in a few years time after he gets fed up with them messing about making expensive demands for maintenance etc.

    Although he only owns one third of the property, he should demand ownership of half of the freehold because there are only actually two of them with property there so he remains an equal partner. Any less than that, he might as well bend over and spread em because they are going to shaft him.
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  6. Although, if he leases the flat to the estate agents, he could have a clause which states that the estate agent will accept responsibility for the maintenance and return it to him after 85 years in the same condition as it is now...

    I suppose the real catch is that although he's getting £38k now and a dribble of cash from the rental, he won't be in a good position to flog it during his lifetime (presuming that the estate agent wants to consolidate all the elements of the property on an 85 year lease). He has invested in it but won't see a profit on it unless the rental income is worthwhile. By the time his grandchildren inherit it, it probably won't be worth much.
  7. sirbhp

    sirbhp LE Book Reviewer

    nice one troops, we worked on them wanting a 10 year contract that would give the return of circa £51k on the full rent. But as they are going to give him x it could be that the term would be longer.

    Obviously he is getting a brief to assist him but as he lives in close proximity to South Essex collage and Uni places for rent are at a premium. we have not heard of this sort of deal before so it was of interest . cheers again
  8. Tell him to keep it and to force the issue with cash in his favour. Sounds like they are going to student the place off.

    Keep yer hand in, take a slice of the pie directly and above all...stay on site and knob the stuudie birds senseless when they have had too many bacardi breezers/desperate for a breezer