Buying a big house with friends rather than renting?

gary the great

Im currently living in Surrey in the UK (walton on thames) and were renting a small 3 bed between 4 of us. Its a small house but rents here are expensive so we dont mind.

The rent on the house is 1250 sterling a month between us,

We have been looking into buying a big 5 bed house down the road for 280,000sterling between 4 of us and renting out the other room.

We have looked at it and total cost will be roughly 80,000sterling each on the mortgage. But we will own the house, plus the house is bigger and more comfortable and is a bit of an investment.

Is this possible to do and has anyone got any advice on buying a house with 3 mates?
We all have professional jobs with salarys between 25-35k each so shouldnt have to much problem getting the 80k each?

What do yous think of the idea?

patrickolee

Sounds like a great idea. Just consult with a solicitor first and get a clear legal agreement in place. Should cover things like, if one of you decide to leave how do the others buy you out, valuations, bills, etc.

rain on

Three friends of mine (married couple plus a friend) took out a mortgage between them a year or so back, on a big place in Leitrim, and it seems to be working out fine for them. Personally I'd rather eat my own foot, but then I'm not a people person when it comes to living arrangements.

ronbyrne2005

If you do this you will lose your first time buyer status in Ireland. Make sure you have a good agreement in place as even best of friends can fall out over finances. What if one person wants to sell out but others cant afford to buy him/her out or you can't decide on value of their share? Seem like a good idea if the mortgage is around same as rent.

Rudolph Claus

Is 4 different parties not just asking for trouble? Too many chances of people changing minds, etc. Are any of ye a couple with each other, might be a bit more secure or ye would want to be pretty good friends. Perhaps if ye check everything out and consider what happens if someone wants out, etc with a solicitor. What if 1 person starts bringing around a load of knobs and that sort of thing.

Am i right in thinking this type of ownership is a Tennancy in Common?

The_Conductor

As per above- seriously sit down and discuss what the options are when one (or more) of the people involved decide that they want to exit from the shared house. House prices there are rising at the moment- perhaps a few years down the road one (or more) of your mates may decide to cash in their portion of the houseshare. How does this work? Would the house have to be sold? Would the other owners buy out the friend- and if so how would they finance it?

Lots of questions.

If you are happy living together at the moment- it does not necessarily mean that it will be the same in the future. When your friends meet SOs and want to get married etc- things will change. Perhaps thats not in the too distant future?

ircoha

patrickolee wrote:

Sounds like a great idea. Just consult with a solicitor first and get a clear legal agreement in place. Should cover things like, if one of you decide to leave how do the others buy you out, valuations, bills, etc.

this is good advice and normally on valuation it is the average of 3 out of 5 valuations: u drop the highest and lowest and ave the middle 3

an option I use is to set up a company with equal shareholdings and the valuation rules are the same: it means nobody is a first time buyer.

it makes changing owners a bit easier as the shares can be more easily transferred.

gary the great

I didnt know you loose you FTB status in ireland if we do this? Thats worth noting.

As i said were in the really early stages of this and were going through all the
scenarios. I personally see this as more of an investment. Price houses are rising here and this is a fine big house that will really rise in value.
If i want to go back home in a few months i'll just rent my room out that should cover most of the mortgage, i'll then just cover the rest myself.

Were going to talk to a solicitor about writing up an agreement and finding out whats the best way to go about this.

antoinolachtnai

If you put the property you live in into a company in Ireland, I think you'd be heading for a pretty messy and expensive capital gains tax situation when the cash needed to be liquidated out of the thing.

I don't know how this would work in the UK.

You also need to think about the 'dynamic' of the market as regards small and big houses. In Ireland, larger dwellings seem to be better value than smaller dwellings, because most of the demand is still for smaller places. This is because of the demographic. Over time this will shift though.

dame

Think of things like furniture too. Two friends of mine (two girls) bought a house together about 5 years ago and when one was getting married they decided to sell it and split the profits. All seemed fine until it came to the time to move out. There was war then about who had bought the sofa, the dining table, lawnmower, who paid more for the washing machine etc. It got very messy for a few weeks until one backed down and then the other felt bad and agreed to compromise.

gary the great

Well for furniture we decided we'd just pool together and go to an auction and buy loads of cheap second hand stuff between us.

We were talking to sharetobuy.com and they are checking to see if we will be approved for a mortgage and willing to guide us through the rest of the process.

iguana

I would suggest that if you decide to buy you should decide a minimum time-frame during which the house will not be sold, such as three years, and get a fixed-rate for that time period. Interest rates here may possibly hit 6% before the end of the year, some economists have suggested this will happen by August. (Though of course this is just educated guesswork, but many banks are pulling their current fixed rates so that suggests that further hikes are coming).

In addition you should all ensure to get payment protection insurance which will mean that in the case of one of you becoming ill or redundant (or if they die) their payments will be covered.

ETA: ebay is fantastic for cheap furniture. I kitted out most of my house with ebay stuff.

Victor

This tends to work best with only 2 or 3 parties, the more parties to the deal, the greater possiblity of a falling our of some kind.

You also need to consider what happens when 4 becomes 6 and then sprogs start popping up all over the place. Sure the tenant can be kicked out, but after that its complicated.

What will you do for hosue guests?

http://www.boards.ie/vbulletin/showthread.php?t=173124

chump

I honestly can't see it working medium term. Grand buzz for the first year maybe. Too many ifs and buts, people's circumstances change so much so quickly. Is it worth the hassle for the questionable upside - a few bucks?