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Jayne Owen · 30-08-2012, 02:00 PM

After several long months toiling away on our most recent venture - a local town cente restaurant - this is my first foray into the new Property Tribes site. Had a look around and starting to get the hang of it. Smile

David and I have been full-time on the restaurant project for 10 months, 5 months on the refurbishment (full story in the blog section of www.conpassionata.wordpress.com for anyone who's interested in refurbs) and another 5 months getting the venture up and running. Our chef business partner is now taking over full management of the business, so D and I have returned to normal property mode again. It's good to be back.

So on to matters property ...

We have the opportunity to aquire a fully licensed student HMO in Swansea. The vendors bought it for their daughter who has now left Uni. They carried on with it for a couple of years but his father has recently become ill and needs help and support. Living 2.5 hours away from Swansea, they want to sell the house as neither now has enough time or energy to look after it properly.

They want to do a quick deal, but in order to buy conventionally we need to sell one of our poorer performing BTL's. Problem there is that our tenant is undergoing cancer treatment and we just don't feel that we can put them under more stress at the moment.

So, would a structure like this work? We agree a price and exchange of contracts with as small deposit (as small as possible). Then put in place a tenancy agreement with a delayed completion for say 2 years, allowing time for us to raise the deposit.

We'd appreciate your views - in what rent to pay, what deposit to put down, etc - these would be useful. Students around here pay around £55 - £60 per week, plus bills. AST rent on whole property around £595.

nick tadd · 30-08-2012, 02:34 PM

Hey Jayne, it's great to see you back. How is the restaurant going? (I know it's off topic, but it's a great venture)

N

Vanessa Warwick · 30-08-2012, 02:37 PM

Hi Jayne, and a warm welcome back to Property Tribes! Smile

Thanks for the up-date on your latest news and congratulations on the launch of your restaurant. I can only imagine how challenging that must have been, but it looks like you pulled it off!!!

I will have a ponder about your property question and I am sure others will come along with some useful input.

In the meantime, it's great to have you back.

Lynne Davis · 30-08-2012, 09:09 PM

(30-08-2012 02:00 PM)jayne_owen1957269954 Wrote: So, would a structure like this work? We agree a price and exchange of contracts with as small deposit (as small as possible). Then put in place a tenancy agreement with a delayed completion for say 2 years, allowing time for us to raise the deposit.

We'd appreciate your views - in what rent to pay, what deposit to put down, etc - these would be useful. Students around here pay around £55 - £60 per week, plus bills. AST rent on whole property around £595.

I don't see why it shouldn't work in principle, though have never actually done anything like this myself. How many bedrooms in the HMO?

I don't think you actually have to pay any deposit at all at exchange, as long as the vendor is happy with the arrangement.

By "AST rent on whole property" I take it you mean as a single family let? What's the mortgage on the property - monthly payment, interest rate, and is it IO or repayment? You could either pay them just enough to cover the mortgage and undertake to do all the maintenance yourself, or offer them something akin to the single AST rate - but if they just want to wash their hands of it then the former (maybe with extra top-up payments to be credited towards the purchase price) is more likely to appeal. Make sure you get agreement that any capital element of the mortgage payments that you make are also to be credited towards the eventual purchase price, and if they have a very favourable interest rate then it's worth delaying completion for as long as possible.

As for whose name goes on the tenancy agreements, the rent-to-rent way of doing it seems to be that you take out a commercial lease on the property and become the landlord yourself, but the mortgage conditions may not allow this. Alternatively, you could just act as agent, with the existing owner's name still being on the tenancy agreements as the landlord until the sale completes - so of course the buck stops with them rather than you, so they'd have to trust you to run the place well if they don't want any involvement themselves.

Adam Hosker · 30-08-2012, 09:40 PM

If the Vendor has any finance on it, it is very unlikely that the Bank would agree to such a deal.
Im not sure Conveyancer would be happy to leave it in Limbo for two years.

Are you not really just describing a 2 Year Lease! with an Option to Buy after the Two Years?
The option committing you to buy or face a penalty. Lease ensuring you pay rent or loose management and option.

Not my area, but Best of Luck !

Jayne Owen · 12-09-2012, 06:05 PM

(30-08-2012 02:34 PM)nick tadd Wrote: Hey Jayne, it's great to see you back. How is the restaurant going? (I know it's off topic, but it's a great venture)

N

Thanks Nick! Hiccups and challenges as with any venture, but has been going well. Great reviews and feedback so far - people loved the food, interior and ambience. The chef that was in the venture with us is in the process of buying us out, and it's good to get our lives back again. Smile

Thanks to everyone for their comments.

@Vanessa, thanks for the welcome back. It's good to be back in familiar property territory again after big new challenges!

@Lynn and @Adam, the vendor doesn't have a mortgage so there's no lender to take into consideration. David has gone back to her with an offer along the lines of a lease option but I suspect she may prefer an outright sale. We shall see.

Richard Spencer · 13-09-2012, 11:29 AM

Jayne

If they don't like an option, you could do as you suggested above and exchange contracts with completion at a point in the future. This will give them more certainty but the obvious downside for you is that you must complete!

You could manage the property between and exchange and completion to take away their headache.

Best wishes

Richard Spencer
www.templebright.com

Jayne Owen · 13-09-2012, 06:42 PM

(13-09-2012 11:29 AM)richard_spencer Wrote: Jayne

If they don't like an option, you could do as you suggested above and exchange contracts with completion at a point in the future. This will give them more certainty but the obvious downside for you is that you must complete!

You could manage the property between and exchange and completion to take away their headache.

Best wishes

Richard Spencer
www.templebright.com

Thanks Richard. That would work well for us, so we're keeping our fingers crossed.

Rob Dix · 13-09-2012, 07:21 PM

Welcome back Jayne! Wow you're brave - a restaurant must be just about one of the toughest ventures you can possibly attempt, but it sounds like you've pulled it off!

Also really good to see how considerate you're being towards your ill tenant. Examples like that need to be talked about more, to balance out all the "greedy landlord" stories we hear so much of.

Jayne Owen · 19-09-2012, 12:57 PM

(13-09-2012 07:21 PM)Rob Dix Wrote: Welcome back Jayne! Wow you're brave - a restaurant must be just about one of the toughest ventures you can possibly attempt, but it sounds like you've pulled it off!

Also really good to see how considerate you're being towards your ill tenant. Examples like that need to be talked about more, to balance out all the "greedy landlord" stories we hear so much of.

Hi Rob,

Brave or bonkers, it's a moot point! The restaurant itself was a terrific success, though some of the business aspects are challenging. I'm toying with the idea of writing a book about it. Wink

Thanks for the comment about being considerate. It's nice to hear a positive comment, as we could really do with selling that property at the moment as there's a chunk of equity tied up in it that would help cashflow and be used for investing in a higher return property. One hopes that it creates positive karma somewhere along the line ... !

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