Can anyone talk to me about part buy/part rent?

[BuffaloCauliflower]

I know it’s not an AIBU (though house prices where I live are pretty U so maybe that counts)

Despite having a pretty good income (very good by UK wide standards) it’s looking like it’s going to be very difficult for DH and I to buy anything vaguely family sized near where we live, and for many reasons we’d like to stay close.

I’ve started looking at part buy part rent options, which we could afford, but they’ve always made me quite nervous. How do you know what percentage to buy? How to do buy more? What if you can’t afford to buy more shares? Is it really yours or are you beholden to a company in some way? What problems could we foresee?

If anyone has any knowledge and/or experience on the subject I’d be really grateful for your wisdom.

I can’t help with this but I wanted to acknowledge your post and I hope somebody comes along to help soon.

Thanks @Sweetdreamer93, much appreciated!

I did it and it worked very well.

I only bought 50% and never staircased. I sold on those terms, no problems at all and made a decent profit.

However, I sold in a strong market. In the end, resale potential is the most important thing. They can be tricky to resell because of the conditions that they come with.

We had no issues with the company, but many people have had problems with rent and service charge increases. Check the contract carefully.

lmgtfy.com/?q=shared+house+ownership+uk

@araiwa I'm sure OP's already googled it. She's looking for personal advice. If you don't want to give it, don't.

I had a part-buy, part-rent. Bought 25% as that was the minimum. Lived there for six years, never bought a larger share, sold it and made about £40k.

Pros were paying into a mortgage, being able to live where we wanted and being able to essentially do what we wanted decor-wise (with exceptions, like underfloor heating limited the flooring we could use).

Cons were the rent/service charge went up every year a lot (started off at about £450/month and ended on about £900/month) and we were reliant on then finding another part-buy, part-renter to take it on (and they had to pass all the checks etc.)

So a mixed bag, really, but we now own outright in a different part of the country. When we were trying to sell I did worry about finding someone who would buy it, after reading some horror stories, but it turned out fine for us.

I've only known one person to do it. Bought in London, sold 2 years later and managed to buy a bigger property in London.

I would be very careful. What percentage would you own? What about rent increases or services charges? Is there no way you can rent a much smaller/cheaper place to help you save for a full mortgage?

Thanks all.

@LaurieMarlow what do you mean by staircased? Is that buying more shares?

@SallyLovesCheese thank you, that’s pretty much the pros and cons I had in my head. I hadn’t really considered the rent going up, that’s a bit of a worry. I’d have to look carefully at those terms. Was there any scope to negotiate that as there is with normal renting? Probably not as you’re more stuck

@CripsSandwiches with the best will in the world, don’t you think we’d do that if that was an option?! And your questions are literally what I’m asking as well so 😂
To buy a 3 bed where we are would be at least £400k for something basic, not even parking. The biggest mortgage we could get on our roughly £65k joint earnings is about £250,000. So we’d need a £150k deposit. That’s a lot of saving! And we’re saving about a grand a month already, it’s just feasible in the next decade at least, and we have childcare costs looming. Our rent is already fairly cheap for the area for the 3 bed house we rent at £1300 a month, we can’t move into a flat as we have animals, but even if we did we’d only cut our rent by about £200 and that’s still a long way off a £150k deposit... what do you suggest we do?

Just not feasible*

*Is that buying more shares?

Yes

I don't think there was much scope, no, as the company had fixed amounts for the location and size of the property plus what percentage is owned and what rented. So it started off much cheaper rent/service charge + mortgage but in the end we were paying a little over what we'd paid to rent a flat privately before. That could just be the company I bought through though, in SE London. We were lucky about house prices going up, too, so that's worth considering.

I take it you've looked into other options, eg. schemes to help with a deposit or mortgage.

Thanks @SallyLovesCheese that’s helpful. None of the schemes could get us anywhere near the kind of deposit we’d need realistically. With childcare soon we won’t be able to save much at all for a few years either.

I’ve sort of resigned myself to renting for a long time, but thought worth exploring options. I can see PBPR houses 15 mins drive away where we could potentially buy with what we could save in a year or so, that’s incredibly tempting. Also hoping DH will be earning more soon.

I'd look at a slightly different area to be honest. The part ownership schemes are quite risky. There's no guarantee for a start that house prices will increase - if you're stuck in the house you part own you're very vulnerable to increases in rent and service charges. I'm not sure you'd be any better off than continuing to rent to be honest.

I have a shared ownership house. We own 50% but are responsible for all maintenance on the property entirely. We need a new roof as the property was very poorly built, which is about£10k, and 2 years ago had to renew the lease on the house which set us back £8k. If the boiler goes, windows need replacing etc it is down to us 100%. I would recommend you talk to the landlord to know up front what you are responsible for.

That said, we could not afford to live where we do if it wasn't for shared ownership.

Due to rises in the property market we can't afford to staircase. Our only option to own anything outright is to move far away, which we can't do due to secondary school, jobs, elderly parents.

We did this 10 years ago, we had 50% share and only needed 3000 deposit for three double bedroom new build, 40 mins from London. we finally staircased to 100% two years ago. We have been really pleased with this scheme as we now have equity in house and can sell on open market also.

We also only owned 50% when we had a leak but becaus the housing association had a building insurance on the properties that we paid as a service changeWe claimed through them. They were buggers to start with but because we knew about insurance they had we just didn’t back down. You might be able to get some of the money back for paid out on roof?

DD has a shared ownership flat in a very desirable development where resale prices are excellent. She started with 40% and staircased to 50%. There are limitations on what you can do, eg you can't sub let, though you can have lodgers.

The affordability criteria are quite strict, it's worth doing some research to find a good deal that you can show is manageable for you.

*good mortgage deal

www.sharetobuy.com/

Assuming you have registered here.

The HA does affordability checks. These are quite stringent.

In 2016 I bought a 45% share in a property worth 222k. After two years I had a payrise, borrowed some money from family, and also the underwriter cocked up his checks (the HA had underquoted for the maintenance charge) so I staircased to 70% share. I think it is now worth 285k. I could afford 90% now but I need to build up my personal savings first.

Mine was a new build.

Pros- no work to be done, brand new white goods, Housing Association manages all repairs including boiler etc. (not sure how this works for houses)

Cons - Service charge (maintenance) started at 90, then 120, then 140, its now 180 a month. This is by far the biggest annoyance.

I am with a large social housing provider and the rent only goes up a fixed annual amount, near inflation.

Advice - check quality as some new builds are excellent (mine won new build of the year, I love it), some are shoddy

New builds tend to be under or over priced. Mine was under because they took so long to build them and didn't change the price! So in two years it went from 222k to 250k value.

Re. Staircasing you can buy a minimum of 10% more in the property at a time. The rent decreases proportionately. You can only staircase 3 times and when you get to 90% you have to go to 100% (not 95%).

Everytime you staircase you have to pay solicitor fees (approx 1.2k).

Some associations do a shared ownership plus scheme where you pay a fixed annual amount to buy 1% more a year (with no fees) up to 90%. It is a good scheme as the 1% is based on the properties original price but not many people do it.

Which brings me to the last point, if you want to staircase, do it as soon as you can afford to (e.g. with a payrise) so YOU benefit from the equity growth and not the association.

Friends did and have had a wonderful experience. If I moved I would seriously consider it.

I almost did this, but ended up finding a flat I could afford with a regular mortgage. Pros are that you need a much smaller deposit, overall monthly costs (initially) are likely to be the same as or less than renting, you have the security of tenure and can often live somewhere you wouldn’t be able to afford otherwise.

However. As others have said the rent, service charge and ground rent can increase annually and while this is likely to be capped in line with inflation, that’s down to the owner. Choose a large housing association if you’re doing it rather than a private developer. The charges WILL increase, there’s no two ways about that, but some less than others.

Many shared ownership properties only have 99 year leases maximum so after 10-15 years you’d need to extend the lease at your own expense + solicitors fees, as you’re unlikely to be able to sell it on with a lease 80 years or below (banks won’t lend on short leases).

If the value increases and you want to buy more shares, you have to buy them at the current value, not the value you purchased at, so it’s quite possible you’d never be able to afford to staircase as it’s not just the value of the shares taken into account when looking at your affordability, but the overall value of the new percentage you’d own.

If the property goes down in value, that could actually work to your advantage when it comes to staircasing but it doesn’t mean the rent on the portion you don’t own would decrease.

You can end up paying two lots of solicitor’s fees - if you want to staircase you have to pay for a valuation, your own legal costs AND the housing association’s legal costs. There’s also a charge for extending the lease on top of the actual price.

All in all, for me the cons outweighed the pros, however I know people who’ve done it and are very happy. Just be aware of all the hidden charges and make sure you know exactly what the rent costs on top of the mortgage. Some new developments are vastly overpriced and the rent alone can cost up to £900 (that’s on top of your mortgage, service charge, bills etc). I would advise going for a second hand property as these tend to be cheaper

I bought on a 50% basis to get on the housing ladder. Stayed there for 8 years, then sold and moved on to buying a house in the regular "100%" manner.

Agree with going for a second hand property rather than a new build.

If you had a crisis and had to claim UC would you get housing help for the rent/service charge part of the payments?