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Buy and rent back


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Dear All

I have spent the last few weeks immersed in all things property as I desperately try to get up to speed as a LL-to-be ( see my thread Building Society v Landlording).

Having moved my focus from my local area (too expensive) I have now become an expert in my selected target area - I have trawlled all the Estate Agents, driven the housing estates, investigated the websites that give sold house price details and even read the local paper.

I'm now ready to start knocking on doors (as recommended by the great and the good on the above thread).

However something that has now come to my attention is the 'buy-and-rent-back' market. On paper this seems like a good market to get into - discounted property prices, long term tenants, no EA fees.

Anyone on here doing this? Any thoughts/comments? More importantly what are the downsides to what seems to be a no-lose opportunity ( I'm sure it isn't!)

Mark J

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People who "sell" to rent back are generally experiencing some sort of finacial difficulty.....

BUT if they are happy with the deal and YOU reference them properly (see other threads) then this is a very lucrative market .....

Personally haven't got any, but know several who have .....one of them goes on step further and negotiates puchase at 60-80% of market value...THEN agrees a fixed rent for 2-5 years and charges them up front (inc in sale deal) so a 100K house is purchased as cheap as 60K then rent at £500pcm(6kpa) x 5yrs is deducted (30K) and the deal done on house purchased for 30k with 5 years rent free.............

It gets better!!!!......... LL uses a 0% cc and pays for prop with bal tx funds, then keeps moving from card to card to keep it at 0%

you wont believe this next bit ...min payment on cc is £5 per month (dont ask!!)

Good enough ??? NOPE we havent got started yet !!!!!

Now Mortgage up the prop 100K @ 85% LTV gives you £85K to go and buy another 3 the same way ( use another cc 0% if you need a couple of grand to make up the balance !!!) giving you a total of 400K portfolio ....

Now mortgage this lot up and you have another 3x 85K (255K) to go buy some more (dont forget that you now have 4 mortgages to service tho!!(255k@6.5% =Approx 16kpa ))

So if you want to play REAL safe put 5 x 16 K (80K) back into BS (to cover M for 5 yrs with no rent coming in ! )

So within a few short months you could be sitting on(recap) £400k prop, Morts of £255, equity £145, and 30-40K on 0% CC.

WITH £255K IN CASH IN YOUR HAND >>>>...........or £175K cash and 80K to cover M for 5 yrs

You keeping up ???!!

Now use your £175K to do it again and get another 3..4...5.??

You should be able to build a £1m portfolio within 2 years ....

AM I KIDDING ............??


What was his initial investment of his own cash ??.....ZERO ....OH there was the cost of the phone call to get the CC ...

Ummmmmmmmmmmmm...................................NOPE ...that was a Freephone no..................LOL

Exactly how ethical this is ...is very questionable tho, as T is selling at a large discount ....BUT if instead of being reposessed and being thrown onto the street, they get to keep their home and live in it for 5 yrs,.... it isn't all bad, is it ??

You could always agree to give them an option to buy back at market value after 5yrs to give them chance to recover from their financial difficulties....or as you pointed out, keep them as long term T's ....you will be in a position to charge well below average rent ( good incentive for them to stay !) and still make a good return !!! OR just charge market rent as T will probably be extremely "motivated" to stay as it is very much their "home"!!

Anything the mind can conceive, BUT more importantly BELIEVE, the body can ACHEIVE ....

Napoleon Hill

Money in BS ....Definately DULL, DULL AND DULL!!!!!!!

Matt(one extension of Martyn Lewis' basic start plan!!!)

MarkJ ...if the above "ideas" are new to you, and you understand what is going on here, you wont be having any sleep for a few nights !!!




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Hi MarkJ,

I agree with Simon that sale-and-rent-back schemes can be very lucrative but I think they are totally unethical and many landlords (including myself) are distancing themselves from them (see the news thread about this on this forum last week).

It cannot be right to "fleece" a homeowner when they are most vulnerable (ie: about to be repossessed). 60% of market value is outrageous. Companies / landlords who do this should be banned from the business.

When I recommend "buy below market value" - I mean buy at about 10% - 15% below market value to reflect the fact that you are a cash buyer, can move quickly and are a better option than a repossession.

At 40% below market value - some tenants would be better off being repossessed.

So - in summary - I would advise that you keep clear of these unethical schemes.

Good Luck,


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In "General" i completely agree with you Mark (not often this happens!), not only unethical but totally immoral ......

but, as with everything else in life, each case should be considered on its own merits and there will always be "an exeption to the rule"

Consider a lot of cases where owner has left it until the 11th hour and is to be repo'd within 7 days

1.No home

2.Likely to have family spilt up for temp rehousing

3.Could easily be temp re housed out of area...assoc probs with jobs, schools, social life etc

4.Storage costs for belongings

5.Prop prob auctioned way below MV anyway

6.Loose family home


8.Going to find it very difficult to get a new mortgage anytime soon

9.Seriously impaired credit rating which is going to affect a whole lot more than just not being able to get another Mort

10.Faced with long term renting or social housing which is not going to improve their future financial status

11.Risk of prop sale not covering debt and still having to pay balance


1.Keep family home

2.Keep family unit together

3.As long as "sale" price covers debt on prop ...Debt cleared.....(removes uncertainty of prop sale price at auction)

4.5 years guaranteed occupation .....or whatever is negotiated

5.Prop maintenance no longer a responsibiltity as new LL takes this on ...and prob to a better std

6.No moving to an "unknown" area

7.Credit rating unaffected

8.No upset or turmoil

9.Fresh start

10.If enough equity then a cash lump sum as well

11.No reposession

Figures will obviously vary wildy from one case to the next and in some cases just wont work ......but clearly there is a market for this ...

I do believe that this should be regulated in some way tho .....

But an owner who has exercised RTB with prop worth 100K and a Mort of say 20-30K could stand to loose everything by being repo'd the above with 5 yrs rent free and 10K cash in hand is a pretty good option i would say !

I have ethics morals and scruples ..unfortunately there are people out there who dont and to do this to someone and then evict 6mths later is more than cruel and heartless......but i suppose it could be said that they at least deferred the imminent problem for 6mths ?

I really cant see how it can be regulated unless a guaranteed term of tenure is introduced ....but how could the "sale" be defined and identified as "one" requiring "special rules" as an owner occupier has the right to sell at what ever price he chooses .....the control on finance is already in place as deal cannot go thru without "debt" being paid off ...lender and sol will see to that .....I suppose "special conditions" could be imposed once people get into trouble ie 6 mths in arrears or once eviction papers served? But lender will still only be looking to cover loan unless a limit of 80% MV(etc) is legally introduced until lender has repo'd but then that would be unfair as O could loose house only for it to sell at less to a buyer they already had lined up....

I understand and agree witht the concern but cant see how this one os going to be resolved......

But what if owner occ with no mortgage with partner maybe, who splits, and cant afford to maintain place ...a deal could easily be done outside any regs, as no lender involement and a very private sale ....and what of the many people who pay their parents mortgages allowing Parent(s) to live in prop for "free" it would be foolish to intro blanket legislation to stop this practice....

I am aware that shelter not happy, and can see why, but how are they actually proposing that the FSA regulate this ???

The only way i can see is to make sure a Vendor is fully aware of implications of what they are entering into and be advised accordingly(whose responsibilty will this be ? FSA ?Buyer ?sol?) ....this can easily be picked up on mortgaged deals (vacant possession, ast in place etc )but not on a cash purchase .....and essentially is 2 seperate transactions

1.Purchase prop

2.let out prop

even if the the fsa try to make it "one" for this purpose ..."bad" LL will avoid, by making O move out for a day, then letting to them next day ...Rules were made to be broken ! maybe fsa could state no relet to O for 3 mths ? but then a relatives name would appear on an ast !

This is going to be impossible to police, as an owner you have the right to sell your prop for what ever you want....unless FSA and our government are now going to start fixing prices.......until repo ..then we are back to square one as above with house sold cheaper when in lenders hands ..and that wouldn't be fair either as FSA would force a possibly unnecessary repo

I wait with baited breath to see what can be done about this ..............

In the meantime if you know anyone about to be repo'd give them my no. !!!! (or MarkJ)!!!



It cannot be right to "fleece" a homeowner when they are most vulnerable (ie: about to be repossessed). 60% of market value is outrageous. Companies / landlords who do this should be banned from the business.

I agree but they can either be "fleeced by lender" and have no home or "fleeced by buyer" and keep home .......Maybe the solution would be to force the prop into auction before eviction with a 12mth(??) secure lease to go with it ??

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all sounds great, but buying a 100k house for 30k ain't gonna happen is it??

Cos surely the person selling has a mortgage on the property and if they've got THAT much equity they'd remortgage to sort any financial difficulties out!!

Unless they not in a position to do this I guess but my point is you still need to 'find' that elusive property owner who's in financial difficulty, who only has a small mortgage on their property.

Or have I been reading this incorrectly?

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There is indeed a growing market in sell to rent back. How ethical it is to buy a discounted property from someone and rent back to them is for others to decide. However, this sector has hit the spot light because some of those renting back have been evicted when they weren't expecting it, either because the landlord has defaulted on mortgage payments, the company-landlord has hit difficulties or some landlords have just been unscrupulous. Buying it at 10% lower than market value or 40% below is irrelevant, it's the security of tenure for the occupant and how the tenant is treated afterwards that matters, so long as they meet their obligations, and it's not always good.

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Easy to dismiss the Rent back market but in many cases people are happy to go own that route either to prevent repo or to release equity.

I have 2 going through at the moment

1.) Person had mort of £102k, divorced with debts of £18k, hubby pissed off even though he owed half the loan, consolidated and took out loan of £129k which included broker fee of £5k (a real scumbag operation) and £1k plus arrangement fee on loan. Mortgage of £890 a month, she earns just over £800.

In arrears after 3 months facing repo and I went to court to get her more time, val £170k, buying £144k which includes arrears plus £7.5k redemption penalty means she gets hit with £14k in fees. At Auction it would prob sell for less than £150k before fees as auction market has dried up and thats liaising with auction house and getting their input.

She initially agreed rent of £780 before i found out her income and then wanted to move out,place needs new kitchen and bathroom plus redecoration. On repo she was out the door before Christmas with nothing.

She paid a fee to get new rental prop of £600 which would be monthly rent and was going to have to pay another £900 as deposit, so I have let her have 6 months for price of 5 as will be 6 months before I'm ready to invest in bringing it up to the standard I want, she has a son doing GCSE's and worried and stressed about how he will cope, she isn't coping well which is why i attended repo hearing in her place. Now she stays there until sons gets his GCSE's out of the way.

I spoke to her MP and have pushed her to write to her MP about what has happened as he may get her £7.5k waived from a subprime lender and got sent a copy of the letter as will happily help the MP get her this money which gives her a lifeline.

CAB did Sweet F*** All and had I not done anything she had zilch and was out the door.

2.) Person has mort of £39k and secured of £19k paying £670 a month in repayments and lives with mother and daughter who is at school.

Value is £106k and agreed % I would buy from her as 82% irrespective of valuation and would have increased in valuation higher.

She wants to take the cash out and stay as a tenant as has lived there for 20 years, she gets 6 months at £475 then goes to market rent at £550 and will probably increase every 2 years after that. 12 months AST with a commitment that it will be renewed as long as I own the property subject to her ensuring rent paid by S/O on time.

Maybe I pay a bit more than other people buying below BMV out there but not sure how I am taking advantage of anybody based on those 2 cases.

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30k for 100k houses ...yep very much happening.... you'll love this bit ...they are all in BARRY !!!

Guy also does loans for a living so has ready access to his market ......

Cant comment on the "morality" or "ethics" of his loan cos dont know the guy personally !!!

Realistically as Mark points out, and as i have in many previous posts, 15-20% below MV is enought to make a project potentially VERY viable ??is it not ??any more is a bonus...

I think over the next 12 mths or so there is going to be plenty of opp to pick more than a few up !!>>>>><<<<<<<<<<<<...

MarkJ ...Wot ave you started here !?

If O a RTB then yes loads out there with tiny mortgages ...but with splits, problems and people who have got to repo stage clearly a rem not feasable...

Not saying it is like picking apples off a tree ....but they are out there ...

Odecar ......you're a saint !!

Let us not foget that a lot of these deals are on x council prop which were sold on RTB ........which in itself i feel, was immoral and unethical, so these props were sold to most of these buyers at a vast discount to start with .........and the profit really should not belong to the O, but the local councils ????

So this problem could be considered to have been created by the government to start with .....now it has gone full circle....

I have a prop (a 2 bed flat) within my portfolio, that belongs to my partner, she paid 16K for it when MV was 56K, (after living in it for 6 yrs to get discount).

It is now worth around £130k .......and yes it has been fully mortgaged to buy a pile more .......great .......but so very wrong, and should never have been allowed.


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Wow what a can of worms!!!!

Some very impressive numbers there.

I've had a very quick sniff around the web and there's loads doing this, in all shapes and sizes.

I'm definately going to dip a toe in the water on this. But not to rip off owners. 20% under MV and a long-term tenant is fine by me (maybe a bit naive but hey....).

Ad hopefully going in a local paper next week...... let's see if anyone bites.

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good luck with it Markj, let us know how you get on . . . .

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  • 2 weeks later...
MarkJ ...if the above "ideas" are new to you, and you understand what is going on here, you wont be having any sleep for a few nights !!!

Rodent, you were absolutely right - each night I'm rushing home from my business, rushing the kids to bed and continuing to delve, dig, read and learn about this market. It is hugely exciting for a property newbie like me.

A big TY to Odecar as well for his PM and help.

I'll keep you all informed as I progress.

(As an aside, an old employee popped in for a drink this week, bemoaning the price of property. Told him to go and find me a property he likes and I'd buy it and then rent it to him - as long as it stacks up of course. Isn't finding the tenant then getting the property the wrong way round in this game :blink: )

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(As an aside, an old employee popped in for a drink this week, bemoaning the price of property. Told him to go and find me a property he likes and I'd buy it and then rent it to him - as long as it stacks up of course. Isn't finding the tenant then getting the property the wrong way round in this game :blink: )

There is more than one way to skin a cat . . . . .

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(As an aside, an old employee popped in for a drink this week, bemoaning the price of property. Told him to go and find me a property he likes and I'd buy it and then rent it to him - as long as it stacks up of course. Isn't finding the tenant then getting the property the wrong way round in this game :blink: )

Nothing wrong with this as long as it is the " right person " Did a flat to spec requested by a future T (family friend) she stayed for nearly 5 years and returned it better than we gave it to her ..A1 mint!! ...BUT always have a plan B in case they

1. dont take it at last min

2.Their circumstances change ..you need it to stack up on the open market !!!

On the main thread .....have put 2 very silly offers in on 2 props today !!!!!! will let you know how they go ...( thats all for now as ..vendor may well be reading on here and it is a bit of a unique deal!..or could be !)

And have turned a few more rocks and found another couple worth a punt !! ..I suspect there are going to be a lot of bargains in the very near future ....spoke to a letting agent today who has not had a sale in 4 weeks and is going to advise all of her customers to drop price by 10% on monday ......

Cash is now very much King !!!!!

So Mark you found anything worth persuing yet ?!


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"spoke to a letting agent today who has not had a sale in 4 weeks"

Interesting one this simon. . . .

Sales are poor at the moment admittedly, for obvious reasons (christmas etc) but lettings are really strong!

We're letting within days of taking a property on...

But then again we're not LIKE other agents, we're more proactive :blink:

Check out our advert in the Barry Post next week Simon!!! (I KNOW you read it cos you advertise in it)

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