Property company want to rent my house long-term, but at a discounted rate

Nikephorus

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Hi All, not sure if this situation has been discussed on AAM before, but I'd value people's opinions on the following...

I have received an interesting offer for a Belfast investment property I own. For ease of calculation I have rounded numbers off.

Belfast Residential Investment Property

Monthly costs (mortgage, insurance, rates, other costs) = £800

Current market rent for this type of house = £1000.

My house needs some refurbishment and so attracts approximately £900 per month. Once void periods are factored in, the rent averages out somewhere in the region of £800 per month.

A property company has offered to rent the house from me for 5 years for £700 per momth. They plan to sublet individual rooms and to make a profit in the difference between the rent paid to me and the amount received from each individual tenant. They would be responsible for finding said tenants and for collecting rent. I would be paid regardless of whether the company is getting rent each month.

This arrangement would save me considerable energy (both physical and emotional). It would also provide a stable income, allowing me to accurately predict how much I need to subsidise the investment property by each month.
Another plus for me would be that the sub-tenants' rent payments would include heating, meaning that the place will be kept warm and damp-free - not always the case with tenants.

It is an offer which I am seriously considering. I just wondered how the offer seems from a neutral perspective. Remember the £700 monthly rent will remain constant for the 5 years, even though market rates are likely to rise during that time.

Should I take up the offer? Do I have leeway for bargaining in your opinion. At the moment, the 5 year contract seems very attractive to me, £700 rate seems low. Should I aim for higher? I will be speaking to the company tomorrow and need to decide how ballsy to be with them....
 

mathepac

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Why not run it as a HMO yourself? Will they return the house at the end of 5 years in its current state? Who pays for maintenance / breakages during the 5 years? Who furnishes it to operate as a HMO? Have they any property owners they can offer as references?

HMO = House of Multiple Occupancy
 

Nikephorus

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Why not run it as a HMO yourself? Will they return the house at the end of 5 years in its current state? Who pays for maintenance / breakages during the 5 years? Who furnishes it to operate as a HMO? Have they any property owners they can offer as references?

HMO = House of Multiple Occupancy
Hi Mathepac, thanks for your reply. I currently run it as a HMO, having made alterations a few years back (e.g. upgrading fire safety and adding a 2nd bathroom). I have had mixed success with it. It's in an area dominated by students which has in the past led to various problems (not knocking students in general here, just relaying my own experiences).

The company would supply furniture. They would be liable for damages.

The big advantages seem to be -

a) A significant reduction in the amount of work and worry required from me to sustain the investment property

b) A guaranteed amount of rent coming in over the medium term.

The big disadvantage seems to be -

a) The rent received by me would be lower than I could get currently, and significantly lower than what I could get in the medium term.

I just wonder is there a particular percentage which I should be looking at the deal from, i.e. is there a certain percentage profit for the company which I should accept but beyond which people feel I am being had?

P.S. It does seem to be reputable company. Their website seems to indicate that they have experience and credibility in this area.
 
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Bronte

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P.S. It does seem to be reputable company. Their website seems to indicate that they have experience and credibility in this area.
You believe websites do you?

Can you explain to me how they are going to make any money on this please.

Any chance they are going to be growing cannibas?

Can you name the company please so we might take a look and see how this is a good idea. (I'm not suggesting said company will be growing cannibas)
 

cremeegg

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On the face of it you get £100 a month less income for less work, that might be attractive depending on your circumstances. It is entirely a matter of personal preference, I don't see how we can advise you on here.

However digging a little deeper, I doubt that it would work out as well as that. Will the place be a wreck in 5 years, probably. Will they pay you in full every month, maybe. If either of these things go wrong what will you be able to do about it, very little.

Ask them to introduce any other owners that have gone down this route with them and see what their experience has been.
 

mathepac

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@Nikephorus I just noticed amounts posted are in £STG. As the house is located in the UK, UK laws apply and posters in AAM may not have the knowledge / experience necessary to make suggestions.
 

Nikephorus

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Hi guys, thanks for your inputs.

You believe websites do you?

Can you explain to me how they are going to make any money on this please.]

The way it works is they pay me less than the going rent for the property as a whole. Then they rent out individual rooms which, while messy, will bag them a premium in rental income.
The fact that the rent they pay me remains constant throughout the X number of years the tenancy lasts means that the later years will be more profitable for the property company.

The plus side for me is a reliable, void-free tenancy which should(!) be less stressful and less work. Remember I'm based down south, while the investment property is in Northern Ireland.


Can you name the company please so we might take a look and see how this is a good idea.
I'd rather not name the company. I have met two of their representatives and called into their offices. I've also checked them out online (obviously not just their own website).

I have decided to go with them for an initial period of 3 years. My hope is that it reduces the work which I need to put in and gives me a steady, if not spectacular, income. I can revisit this in 3 years time.

Again, thanks for your time and inputs.
 
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Nikephorus

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Hi guys, thanks for your inputs.



I'd rather not name the company. I have met two of their representatives and called into their offices. I've also checked them out online (obviously not just their own website).

I have decided to go with them for an initial period of 3 years. My hope is that it reduces the work which I need to put in and gives me a steady, if not spectacular, income. I can revisit this in 3 years time.

Again, thanks for your time and inputs.
Just by way of an update...
My experience with the property agency has been excellent. Once you allow for time, stress and effort saved, it has been a very worthwhile and financially beneficial experience.
 

Saavy99

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I wouldn't do it, subletting the house to multiple tennents and you only getting a pittance and no increase for three years you making absolutely no money, that firm you dealing with could easily go under and what then...I would look to selling and pocketing whatever equity it makes for you.
 

Feemar5

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Can you negotiate a rent review after 2/3 years - 5 years is a long time. If they look after everything, maintenance etc., it seems attractive and hassle free which is to be considered.
 

Nikephorus

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I am still using the company and they have kept the house in good decorative order.
I went with them for 3 years originally and renewed (with a higher rent) when that expired.
As previous posters mentioned, the balancing act is between getting reduced rent but my time/effort/stress between reduced in tandem.
 
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