Investment/Property Opportunity

[Jason_Fisher]

Hi everyone,

I have been offered the opportunity today to buy a £150,000 house for the price of £100,000, with the condition to let back to the current owners at £500 per month. That is a steady 6% interest per year which i consider to be extremely good at the moment and moving forward.

Instead of investing all the money myself as alot is tied up in other areas, i was thinking about pooling some money together with other people to make the most of this opportunity. Currently an OAP lives there with his son of 24 and he would like to live there for the rest of his life with his son, which guarantees the property to be let from the set out. Also its where his son grew up so he would like to stay there for a long time if he can.

Now i am posting this on here firstly to see if anyone would be interested in this opportunity, and secondly to find out a little about what i would need to do if i wanted to get say 100 investing £1,000 each for this opportunity. I would be prepared to pay for all the legal contracts etc.

Any advice would be greatly appreciated.

Thanks

 

[sanjiv]

100 investing £1k would not work. What about when it comes to maintenance and repairs work. Who pays for that? You can't just take it out out the rent pot because no single person can make the decision or findd suppliers and workmen without disputes from the other 99 people.

 

[Jason_Fisher]

Yeh i thought about that but the tenants would pay for all repairs and maintenance etc. The reason they have come to me with this idea is because they took out loans with extremely high interest rates etc and cannot really keep up with the payments. So their plan is to sell their house to pay the debts and rent the house back. There are companies out there that do this type of deal and the tenant treats the home like their own by maintaining it and decorating etc. The investor just makes a good return.

It doesn't have to be 100 people investing £1,000, it was an example, it could be 10 people investing £10,000.

 

[sanjiv]

So the maintenance will be in the contract for tenants to do? What about after these tenants move out?

 

[Colin Parker]

Hi everyone,

I have been offered the opportunity today to buy a £150,000 house for the price of £100,000, with the condition to let back to the current owners at £500 per month. That is a steady 6% interest per year which i consider to be extremely good at the moment and moving forward.

Instead of investing all the money myself as alot is tied up in other areas, i was thinking about pooling some money together with other people to make the most of this opportunity. Currently an OAP lives there with his son of 24 and he would like to live there for the rest of his life with his son, which guarantees the property to be let from the set out. Also its where his son grew up so he would like to stay there for a long time if he can.

Now i am posting this on here firstly to see if anyone would be interested in this opportunity, and secondly to find out a little about what i would need to do if i wanted to get say 100 investing £1,000 each for this opportunity. I would be prepared to pay for all the legal contracts etc.

Any advice would be greatly appreciated.

Thanks

Are you aware that buying a property and renting it back to the previous owner is now regulated by the FSA and is only possible - other than in exceptional cases - if you are personally authorised by the FSA?

If you are not aware of the regulations I suggest you make yourself aware asap before you commit a serious criminal offence.

Colin Parker

 

[Jason_Fisher]

Thanks Colin, this is exactly the type of information i would like to find out. Greatly appreciated. Is this something you have to pay for? As if i bought a house to rent i would not need this and this is kind of the same thing... i am buying a house and renting it out ( the only difference is i am renting it to the people i bought it from ).

 

[Colin Parker]

Thanks Colin, this is exactly the type of information i would like to find out. Greatly appreciated. Is this something you have to pay for? As if i bought a house to rent i would not need this and this is kind of the same thing... i am buying a house and renting it out ( the only difference is i am renting it to the people i bought it from ).

You cannot get regulated by the FSA to conduct sale and rent back purchases (SARB's) or even apply to be regulated currently.

Only companies who were doing SARB prior to July 1st 2009 and who where authorised by July 1st 2010 can conduct SARB purchases. There are only two such companies and we are an authorised introducer to one. If you want to pass this lead on and earn £1K-£2K commission if a SARB is concluded PM me.

Colin Parker

 

[Jason_Fisher]

Thanks Colin... I have PM'd you also.

I guess that i could buy the property, and then rent it to the current owners separately though? That would be just like buy to let. But in the rental agreement, instead of it being 12 months, it could be longer?

 

[Colin Parker]

Thanks Colin... I have PM'd you also.

I guess that i could buy the property, and then rent it to the current owners separately though? That would be just like buy to let. But in the rental agreement, instead of it being 12 months, it could be longer?

No you can't do that either because that is still deemed a rent back by the FSA.

As I said earlier, you need to be fully aware of the FSA regulations which are comprehensive in preventing exploitation of the SARB rules - and what you are suggesting the FSA considers to be precisely that.

Colin Parker

 

[jeffbearcroft]

Hi Jason

First point, this is close to being a reversionary property interest (you only get VP on death of the life time tenant) and is likely to come under FSA regulation at some point. 6% initial yield may be good but I wouldn't assume it just based on what you have outlined.

Getting 100 investors together is definitely FSA regulated activity and needs to be dealt with very, very carefully - marketing costs, issuing a prospectus, compliance, legals etc are expensive and if not managed properly the FSA will take action.

So my advice, consult a suitably qualified solicitor or accountant before doing anything.

Regards

Jeff

Hi everyone,

I have been offered the opportunity today to buy a £150,000 house for the price of £100,000, with the condition to let back to the current owners at £500 per month. That is a steady 6% interest per year which i consider to be extremely good at the moment and moving forward.

Instead of investing all the money myself as alot is tied up in other areas, i was thinking about pooling some money together with other people to make the most of this opportunity. Currently an OAP lives there with his son of 24 and he would like to live there for the rest of his life with his son, which guarantees the property to be let from the set out. Also its where his son grew up so he would like to stay there for a long time if he can.

Now i am posting this on here firstly to see if anyone would be interested in this opportunity, and secondly to find out a little about what i would need to do if i wanted to get say 100 investing £1,000 each for this opportunity. I would be prepared to pay for all the legal contracts etc.

Any advice would be greatly appreciated.

Thanks

 

[Investors-Wanted]

Wow what a return

Invest £1000 and earn £500 sometime in the future or make £5 per month.

MMMM

 

[Jason_Fisher]

It wasn't the investment i wanted advice on, it was everything that was involved, as i know this is a GREAT return! You could always go and put your money in the bank at 2%! With this you would be investing in a property with a market value of 50% more than the purchase price and a guaranteed return until the death of the current owner ( didn't want to use the word death, but its been a long day and could think of a better way to put it ). £60 return per year on a £1,000 investment isn't too shabby to me.

Now i have seen your signature and see that you seek investment for things and this may be something you know all about, but i am not, this is just something that i have been offered and came on here for advice, so less of the sarcasm in this post. Maybe you could even be a little helpful... afterall thats what made me post this in the first place!

 

[Billmccallum]

It wasn't the investment i wanted advice on, it was everything that was involved, as i know this is a GREAT return! You could always go and put your money in the bank at 2%! With this you would be investing in a property with a market value of 50% more than the purchase price and a guaranteed return until the death of the current owner ( didn't want to use the word death, but its been a long day and could think of a better way to put it ). £60 return per year on a £1,000 investment isn't too shabby to me.

Now i have seen your signature and see that you seek investment for things and this may be something you know all about, but i am not, this is just something that i have been offered and came on here for advice, so less of the sarcasm in this post. Maybe you could even be a little helpful... afterall thats what made me post this in the first place!

Jason

Apart from the FSA rules on SARB that has already been noted by other members, a 5% retrun is not a great deal for a £100K investment.

Anyone with £100K cash to invest could make 20% return in the property market simply by developing new housing in areas where the market has not fallen due to the banking crisis 2 years ago (such as the South West, where 3 bedroom houses still sell for £250K in may areas).

I could buy a site tomorrow with PP for a shop and 8 flats for just £250K, another £250K for build and final value in excess of £850K. If I had £100K I could easily get development capital for the rest and make in excess of 20% in less than 15 months.

 

[Jason_Fisher]

Thanks for that post... i'm sure you can, and that is very good if you know what your doing etc. My initial post was just to find out about this as 6% is better than the banks currently and there is little to no risk, whereas what you have mentioned seems to be a little riskier. Thanks for your advice, my last post was just frustration, as i cannot understand why people come on here with sarcastic comments?

Is this an area you are in then as you seem to know your stuff.

 

[sanjiv]

There is risk though because say if the old man were to leave us in a month. A bit screwed then because you have to find other tenants. You won't get a good return if you do it yourself and a lettings agent will charge something like 10% or more.

Also to have many investors like this, you would prob want to put it into a Ltd company and have you as a Director. The investors would be investing in you to make a right decision about work to do on the property etc. Would you do this for the same return as everyone else because you invested the same amount or would you value your time and want to take a wage? All the costs add up. 6% isn't brilliant because you could probably make more at this stage in the economy investing in a FTSE 100 tracker or other stock funds.

My family have a background in property and I would say that 6% isn't a brilliant return. 10-15% is better and in some cases slightly higher.

I'm not trying to just be negative but I think if you want to go into this field, you need to do more research and look into it further.

 

[MASSEY]

for 2 - 3 people it would be good. Not a 100.

If you kept the place 15 years it would probably be worth 300k

That would be a nice investment.

Property always increases above everything else, its viable but only interesting for 2 -3 people.

 

[sanjiv]

for 2 - 3 people it would be good. Not a 100.

If you kept the place 15 years it would probably be worth 300k

That would be a nice investment.

Property always increases above everything else, its viable but only interesting for 2 -3 people.

Thing is though who is really going to be interested in buying 1% of a property? It may triple in value but I don't think there would be enough interest in buying it because it is such a small investment. You are definately right about it being a 2-3 person investment but there could still be disputes.

 

[oldeagleeye]

Another no brainer. I take it OP you dfon't even have £1,000 to invest yourself if your looking for 100 punters and in any event as well as the FSA you can't just leave it to tenants to insure the property or carry out repairs. They may not have the money at the time that they are needed and again in any event - it is the landlords responsibily to have a safety ispection carrried out annually.

Re-reading the first post I also think this deal stinks anyway. Why would anyone knock a whooping £50,000 of a £150K property. The only reason I can think of is that the present tenant is a sitting tenant on a regulated rent and @ £500 a month rent that values the property at little more than £50K - £60K. At the very most £75K.

May I suggest then that putting this deal together would be a nice little earner for you Jason. Sorry pal it ain't going to happen.

Rob

 

[adventurelife]

Putting aside for the moment that this is a regulated environment and as such should only be tackled by those with the history and qualifications to do so.

Other points all negative I am afraid

The are hundreds of deals on the property market at present of people needing to sell well below valuation.

There is a reason the banks are insisting on high deposits High possibility of big downside in market.

6% return on a £100k investment is not good, That means I have to tie up £500k of money just to earn £30k before costs ( I know this is a leveraged purchase but that is another subject)

Property is a long term investment and should not got into unless the money that is invested can afford to be tied up for a very long time

Shared investments between multiple people are a minefield of pain. Can work but numbers need to be kept to a minimum like 2 or 3 max ( I know shared funds work well but I am referring to small business investors)

I could go on but I think you will catch the gist, I know on the face of it it looks like easy money, but the reality everything that looks like easy money is always a painful road to travel.

 

[Investors-Wanted]

Hi OP

What would happen if one of the investors had financial difficulties and went bankrupt. Would you have to sell the house or would you simply buy them out. Would all the investors need to go on to the deed.. This sounds very complicated.

Good luck with it

 

[Billmccallum]

Is this an area you are in then as you seem to know your stuff.

An area I want to develop, but only have £25K equity in a house in the North East (where prices are stagnant) and lost all my liquid assets when the banks failed two years ago and still not recovered.

I'm trying to find like-minded partners with liquid assets to get one of my projects off the ground.

 

[Jason_Fisher]

Thanks for all your comments. Just to confirm, i was not looking to get into this area as a business or anything, i was just offered this deal and don't have £100,000 spare cash so just came on here to see if something like this would work, thats all. I think with the feedback i have had on here i will pass on the opportunity. Thanks everyone for your advice.

Also...Rob, the reason they have knocked so much off the value is simply to sell the property quickly as they cannot manage their current debts, seems reasonable to me, i hear of this happening all the time, all over the UK, thats why there are specialist companies doing this type of business.

 

[Barnie]

if i was in your position i wouldn't mind so much and could negotiate a term for myself if it wasn't for the tie in, for her i consider letting her live there untill she dies but i wouldn't want it to go any further than that i would want to get out then or re-rent it out, £500 now might seem ok but in 10years time the rates for the area could be £1k whilst your still tied to £500/month


They know they have the upper hand and so i wouldnt touch it