Selling but renting it back?

[ImInStealthMode]

So we've been trying to sell our 1 bedroom flat for a few months and twice we've had a buyer in place but have had offers on places we loved rejected in favour of chain-free offers. Frustrating.

We've decided to come off the market for a couple of months, take a breather and focus on our upcoming wedding.

A friend of ours will be in a position to buy an investment property in a couple of months time, and has shown an interest in ours. It's occurred to me that if he were agreeable we could sell it to him but remain in it, paying him rent as tenants (with proper agreements in place) making us chain-free but without the hassle of having to find and move into short term over-priced rented, and then move again.

Obviously we risk that if it takes us a while to find somewhere then prices will be going up faster than our deposit, but surely if we'd officially accepted an offer from a buyer then the same would apply?

Would you consider doing this?

If your friend is up for it then I don’t see the problem - though for the sake of the friendship you want to be really clear between you about e.g. allowing viewings once you’ve given notice, whether he’d let you leave at short notice when you were due to complete even if he didn’t have another tenant lined up, or how you’d manage the move and cleaning if he did have a new tenant due to move in on the same day you moved out.

Your friend would probably need to pay cash as mortgage company’s won’t like that…

Thanks both. Just an idea at this stage but we're going to get together this week to discuss further.

We'd definitely make sure that every angle is discussed and agreed by both parties in advance, before moving forwards.

Cash wouldn't necessarily be an issue for him, but definitely something to add to the list for discussion.

As long as the tenancy agreement is a standard one and the rent is being charged at market value / sufficient to meet the mortgage terms it’s less to be a problem for the lender for your friend to let to you. Some lenders prohibit letting to family members in a BTL mortgage; in reality it’s difficult for them to prohibit friends or acquaintances.

If you sell your home now and rent you'll probably be paying more in rent than you were on your mortgage and if property prices go up any more then you might have a shortfall, if you see what I mean. You will have sold when property is at x value and then you buy when property value is x plus 3% you'll be worse off.

It depends how much rent you will be paying v mortgage.

For example, if I rented my house I would pay £1400+ pcm. I currently pay way below that to the bank.

Is it so you put yourself in the position of first time buyers? Might be worth doing just for a few months.

I totally get that @D0lphine but it would also be the case if we accepted an offer and then didn't find anything right away (Although I suppose ultimately we'd have scope to drop out of the sale in that case).

In the current market locally there's a good chance that being chain free would put us in a better position to negotiate; the property we lost this week went for less than we'd offered, to a chain-free buyer.

Our tick-list for a property isn't particularly long or unusual (2 bedroom, outside space, parking space - everything else open to consideration) so hopefully we'd be looking at 3 or 4 months renting rather than years.