Regulated tenant

[George80]

Hi there,

I'm relatively new to the lettings game and have just purchased a property at auction with a regulated tenant in it (I can hear the sharp intake of breath and shaking of heads from the experienced landlords reading this!).

It is transpiring that this may not have been the best of my purchases thus far, as I am unable to re-mortgage the property and therefore have all my cash tied up in it.

I did take advice from my mortgage broker before the purchase and he, after some research, believed that i would be able to re-finance the propety. However it now seems that this is not the case.

I really do need to get some money back on this place or sell it quickly. Any ideas would be greatly appreciated!

I could obviously put it straight back to auction, but I fear I may lose out on the sale price as people will assume that there is something wrong with the property or that I am short of cash and either way they'll keep the bids low.

Are there any investment companies out there that would look to purchase such a property? The ROI is reasonable at 4.5%, with another chance to hike the rent early next year.

Any advice, contacts, pointers or even a telling off for being stupid would be helpful.

[kim66]

Hi George,

Why is the property not remortgageable? If the ROI is 4.5% I would assume it could be interesting to several investors, unless the property has something wrong with it. But if you cannot get a mortgage on it, does that mean you need a cash buyer for it? Or could you just put it for sale on the regular market?

Kim

[johnholmes]

Hi George,

I have two secure tenants, one who is reasonable, and one who knows that the law is in favour of the tenant, not the landlord.

I do not think a remortgage would be out of the question, but you may need to trawl the market to find a financier.

My advice is to treat secure and assured tenants alike, fairly, but keep a log of lack of access, damage to property, clear rent accounts to prove rent arrears.

I think secure tenants can only be evicted (upon the whim of the judge), on two grounds, rent arrears and antisocial behaviour, keep good records.

kind regards and good luck

John Holmes

[George80]

Hi Kim,

The reason that a 'normal' B2L re-mortgage isn't possible is down to repossession issues. i.e. If I default on payment to the mortgage company, they will be unable to reclaim their property due to the tenant's rights. Even though they could quite easily sell the property at auction with the tenant in-situ, but they don't look at it like that. They, quite sensibly, would prefer to gain vacant posession of their property as they will be able to recoup their money quicker.

So unless anyone knows a way of raising finance on a property with a regulated tenant, then yes the purchaser would have to be a cash buyer. Offering the property for sale on the regular market is difficult due to access issues. I may be wrong, but I don't believe that regulated tenants have to allow access to prosective buyers, unlike tenants on an AST, which have to allow visits towards the end of their agreement.

The property would definitely be of interest to an investor, but it's finding one without going back to the auctions. As I only purchased the property a couple of months ago, any seasoned auction goer is bound to recognise the lot and know how much I paid for it. Then they will wonder why i'm selling it and sniff a potential bargain and can't really afford to lose that much on it!

I guess I could just try it at auction and set a reserve price that I'm happy with, but then I'd need to sell it for more than I paid just to recoup solicitors costs, stamp duty and the 2%+ that the auction house will charge me for selling it!

Anyway, I'm just whinging now! Thanks for trying to help

[George80]

Hi John,

Many thanks for the advice. I've been trying to find someone to finance the place for a while, but I and all the mortgage brokers i've spoken to keep drawing a blank.

I shall keep looking though and I guess you never know!

Cheers again and good luck with all your ventures.

[Melboy]

I think, unless your very lucky, you will have a difficult problem in trying to re-mortgage this property......for all the reasons you have stated.

If your desperate for the money you will have no other option but to go back to Auction or try and sell privately/local Agent.

A timely warning to all you budding Landlords with Auction Fever.......if an advertised property has a long term sitting Tenant.......do your homework first and not put your hand up at the Auction'cos it's cheap!

[George80]

Hear hear! I absolutely agree and with hindsight, I realise that I should have done more research into the property. I just wish the property was cheap and then I wouldn't be so worried!

I'm sure many investors do very well from this sort of property, but you need to make sure that you're correctly geared up for such a proposition.

I appreciate your comments and if anybody has any ideas of how I can make myself 'very lucky' on the re-mortgage front, I would love to be pointed in the right direction. You never know though, maybe the harder I try the luckier I'll get.

Regards

[jam]

You could offer to buy the tenant out. Thereby giving you vacant possesion. You would have to negoitate a price with the tenant. Its worth a try if you need vacate possession.

[terrypuckett]

Hi its February 2007 and you might have sold the property now if not go to www.protectedtenancies.co.uk They sell properties with Protected Tenants Good Luck

[BAS]

Hi,

If you really need the cash...

Try offering the property to the tenant or the tenants family, offer a reduced price but include your required margin.

This may give your tenant a chance of a good investment below market price and allow you come out clean.

Done this and it worked.

BAS