Tenant asking for 'Rent to buy scheme'

A tenant is asking me about a rent to buy scheme ... he tells me that basically we agree a price (example - current market vale plus 20%) for me to sell the property to him at an agreed time in the future ... say 15 years.

Advantages to me ; He will pay a higher rent, he will manage all maintenance

Disadvantages as I see them ; He gets an interest free low value property - I am still liable for the full amount and all of the interest, I still have to wait a long time to realise any benefit plus I will probably still have a loan amount outstanding

Can anyone advise me on the feasibility of such an arrangement ?

Apparently there are companies who offer this service or you can get your solicitors to work together on it ...

Many thanks, B.

It sounds like you aren't getting much in this deal. If he just bought it from right now (with a mortgage/cash) you would get the cash to invest in something else and you wouldn't have to manage the maintenance then either!

What is the reason that you are even considering this? Is he family/friend? Do you have a mortgage on it yourself and it is in negative equity?

Interestingly someone offered my in-laws this recently.

These arrangements make no sense whatsoever.

If the price doesn't rise to price you agree, he doesn't take up the option to buy.

If the price rises, he exercises his option.

You are stuck in a property which you can't sell for 15 years.

Even if he has a contractual obligation to buy it, it would be very difficult and costly to enforce.

If he wants to buy the property and you want to sell it, sell it to him now at the market price.

If he can't buy it now, tell him that you will let him know if you are selling the property and you will deal with him then. I think it's good manners and good business to keep a tenant informed. So if you are thinking of selling, let him know. Try to give him as much notice as possible.

Brendan

Thanks for the responses ...

so yes I am in serious negative equity, the rent only pays 60% of the mortgage and the ongoing maintenance, lpt etc. all come out of my pocket.

bk777 - can i ask what the increased amount is that your tenant is willing to pay? Also, if you care to share; how much is left on your mortgage?

Nope

Definitely don't go for it, there is all the benefit for him and barely any for you. If you wanted to sell you could sell it and then have the money now to play with (paying off the remaining loan balance and starting on a new property for example).

+1 15 years is too long an option to give tenant.