UK Real Estate, New to landlording at 65 + Retirement

[theonethatgotaway]

Hi all. I'm hoping someone can point me in the right direction.

My mother-in-law (age 65) is trying to retire on her house appreciation. Here is her current situation:

She paid 50k back in '83 for a 4 bedroom detached house in Loughton,Essex, Greater London. She is selling it to a buyer for 675k. She has about 200k in second mortgages to pay off, leaving her at 475k total.

She wants to buy her final home for 250k outright. Leaving her 275k. The buyer has been messing her around and to complete the transaction the agent is saying my MIL should buy the buyer's house at 360k which she plans to put down 260k and finance the last 100k for a repayment of 200 pounds per month.

This will leave her with 15k cash, a paid off 250k home, and a rental property with a 100k mortgage with 200 pound monthly payment.

The agent says she can rent the property at 1200 per month, and of course they have *offered* to manage it for her as well at 10%.

My MIL receives 1k per month in government pension and for a secure retirement requires A. a paid off home, 2. an extra 1k per month which is why this rental property is looking good to her.

I have serious concerns about this set up as my MIL is a newspaper investor (i.e. 'buy to let is hot now!!' 'I made so much off my first home, real estate always goes up!'

She has not factored in costs to maintain/repair the home if need be. She plans to quit working (she currently earns 1k per month) and replace it with the rental income.

Where are some calculators I can run some numbers for this scenario?
What are your thoughts, issues, concerns as UK landlords?
She is saying at 70 her mortgage is forgiven due to UK laws and the government pays it- is this true? Is this a primary home mortgage only or does it matter?


I only just learned of this and obviously I'm concerned about her financial well-being as she heads into her 70s and retirement.

She is planning to finalize this next week. Any info at all is welcome.

Thanks!!

[frugledoc]

1200/ month = 4% gross yield before costs, tax stress etc.  Pretty crappy net yield once you factor in voids, repairs, estate agent fees.

Doesn't seem worth it to me when she could earn the same income in dividends from FTSE 100 stocks or a passive bond fund, with little to no effort.

[Dicey]

Oh NOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO! I hope you can hear me screaming all the way across the pond!

[lizfish]

I've never heard of aged-based mortgage forgiveness in the UK, and even so I'd very much doubt it would apply to a buy to let. But then I've never met anyone with a mortgage at 70 either. I'd say if she's never been a landlord now is not the time to start. It might seem like a no brainer, but that's because it's being recommended by an estate agent with much to gain.

Also what sort of prospect is the buyers house? Is it one she would have chosen  given all the rental options in the world? Is the sale held up because the house isn't in a great area and they can't sell it? Is it going to be an easier to rent?

I'd say do all you can to steer her away from this. You can alway couch it in the terms she could always buy a different rental property if she really wanted to later, once she's had time to consider the options.

It's the equivalent of part ex ing your car. It's pretty much never a good deal but they rely on your ignorance or laziness to profit.

[theonethatgotaway]

Well.

Here's the update:

MIL went through with the above scenario. She has not been able to rent the house out yet, and is in dire straights at the moment because she has maybe 500 pounds in her checking account.

She doesn't have any extra money at this point to deal with anything that could come her way regarding the rental house (or her house), so my husband and I are probably the phone call for a new boiler or paint or whatever (which we would happily do for her, but we just moved and are not in the position to be extra spendy at the moment).

Does anyone have any new advice regarding this? Should I tell/ask/try to convince her to sell the house, even though she just bought it? (she can't afford it!)

Thanks!

[DrF]

Sounds like your MIL got hosed. Why would the buyer need her to buy their house? Did the market not support the buyer's asking price for their house? Hopefully she did her due diligence on the 2 new homes she bought. If she were to sell now, she would lose loads of money to fees. It sounds like she needs to work until she can build up quite a bit of reserves it case shit happens with the rental.

[theonethatgotaway]

Yes. I've explained this. But it seems she is set on not working and thinks this is the solution. I have so many alarms going off in my head about this. How much will she lose?

Apparently the house was the first in the chain of 4 homes being sold. Her home was the last. The buyer of the first home was a wealthy guy that wanted the house, then backed out last minute (well only kicked out once the agents convinced my MIL to use her earnings on the house). I think it was overpriced as the family was trying to upgrade and no other offers. The whole thing was going on for 5 !! Months. The agents even convinced my MIL to move out of her house early to convince the others to speed things up (you can tell she's dealing with complete muppets). They just wore her down and she was sick of dealing with it so decided to just buy the first house so everyone in the chain could move on and she could sell her house. I told her many times to back out of the whole deal and find a new buyer (easy with her house) but she hates conflict and not sticking to her word with people.

But now she's inherited a huge headache and we are concerned because it was such a poor decision and she is stressed financially due to it. Would the loss be terrible if the money is reinvested?

[former player]

She needs to put the rental house on the market pronto.

She also needs to look into whether she has any redress against the agents, as they seem to have told her a steaming pile of porky pies.

[theonethatgotaway]

This is what I'm thinking . shes very touchy at the moment due to the stress of the entire thing. I'll give it a couple weeks and then come back to her with a reallocation plan written. I think she can make the gains back after 2 years then will be much better off personally and financially. She can even just keep working a few months to set off the loss. It just makes sense. And who knows what will happen if she keeps the rental and is approaching 70....I wouldn't want to be dealing with tenants and such at that age. Regardless this is the plan. Any other ideas as far as presenting her the plan and the plan itself are welcome! Thanks!!

[LordSquidworth]

Hi all. I'm hoping someone can point me in the right direction.

My mother-in-law (age 65) is trying to retire on her house appreciation. Here is her current situation:

She paid 50k back in '83 for a 4 bedroom detached house in Loughton,Essex, Greater London. She is selling it to a buyer for 675k. She has about 200k in second mortgages to pay off, leaving her at 475k total.

She wants to buy her final home for 250k outright. Leaving her 275k. The buyer has been messing her around and to complete the transaction the agent is saying my MIL should buy the buyer's house at 360k which she plans to put down 260k and finance the last 100k for a repayment of 200 pounds per month.

This will leave her with 15k cash, a paid off 250k home, and a rental property with a 100k mortgage with 200 pound monthly payment.

The agent says she can rent the property at 1200 per month, and of course they have *offered* to manage it for her as well at 10%.

My MIL receives 1k per month in government pension and for a secure retirement requires A. a paid off home, 2. an extra 1k per month which is why this rental property is looking good to her.

I have serious concerns about this set up as my MIL is a newspaper investor (i.e. 'buy to let is hot now!!' 'I made so much off my first home, real estate always goes up!'

She has not factored in costs to maintain/repair the home if need be. She plans to quit working (she currently earns 1k per month) and replace it with the rental income.

Where are some calculators I can run some numbers for this scenario?
What are your thoughts, issues, concerns as UK landlords?
She is saying at 70 her mortgage is forgiven due to UK laws and the government pays it- is this true? Is this a primary home mortgage only or does it matter?


I only just learned of this and obviously I'm concerned about her financial well-being as she heads into her 70s and retirement.

She is planning to finalize this next week. Any info at all is welcome.

Thanks!!

The bolded would be enough reason for me to cancel this transaction.

They took advantage of her.