In this current climate would you buy a 50% share in a house to rent out, even though you already own your own home?

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The house next door to ours has gone up for sale at a very reasonable price. DH and I have been thinking of buying another house on a buy to let basis as an investment.

Altough the house is very reasonably priced we would seriously struggle with the extra burden. However my brother has asked if we would consider going 50/50 with him. DH is all for it, as am I to an extent. We would be able to just afford our half while we are working on the house and bringing it up to a standard that I would be happy to live in.

We have next to no mortgage on our house and my brother also has next to no mortgage on his house.
My bother and DH will do all the work involveed in bringing the house to a decent standard. Brother is a plumber, electrician, joiner and general odd job man. Dh is an ex painter and decorator. So we would only have to pay for materials and not labour.

I fell very cautious in this present current climate. If we were not able to get a tennant in then we would be royaly stuffed TBH.

But on the other hand I have rang around various estate agents and asked re the letting potential of this area, it is good and we would get much more than what the mortgage actually would be, so would be making a profit (albeit small)

Has anyone done this or doing this. What sort of research should we be doing? What sort of questions should we be asking.
Or is it just not worth it ATM in the current financial climate?

BTW, Bro, my dad and I went to view the house yesterday, DH and I are viewing again at the weekend.

There are lots of factors in this. You are very well placed in terms of labour and you already know the area and build standard of the house you are considering, which is good. Also if you can't meet the mortage and the house needs to be re-sold the fact that you've improved it means that you will probably be able to sell it for at least what you bought it for, although it would probably take time to sell in the current market even at a very good price.

I think you should budget for it to be un-rented and empty for at least 4 months out of every year, if you can't cover that then you could be putting yourself into a stressful situation. Don't forget that an agency will take a percentage of the rent for finding a tenants.

The biggest downside for me would be living next to a property that I'm landlord of. I would worry about being constantly available to the tenants for every little niggle. On the other hand if you don't like your neighbours it would be great to be able to terminate their contract.

If you want to make a capital gain from the property then I think that you would be looking at holding on to it for about 10 years. You would also be liable for capital gains tax when you do sell it, but the beauty of having the house next door is that you could sell the house you are currently living in instead and move next door, then there would be no capital gains to pay.

Ooh good advice Bran, thank you.

We already have a tennant in mind, a very good friend of Dh and mine who is DD's god father I am a bit wary about letting to friends or indeed family, but I know for sure that we will not have any money problems from him. He is a very orgainise person. We will still have tennancy agreements/contracts ect drawn up though as I am not that stoopid (much lol)

It will be purely an investment for DD's future (and this lo as soon as it is born)

I am just feeling very cautious ATM with everything that is going on financially in the counrty.
If it were just DH and I and no DC then we would do it in a second but we have to consider the future of our children IYSWIM.

Very good idea to budget for it being unocupied for 4 months out of the year. Contingency is always a good idea, and TBH I hadn't even thought of that.

I mean financially it will push DH and I to the breadline if not past it slightly but I think the investment opourtunity is a good one.

My dad seems to think that the house will sell rather quick even in this current climate a it does not need any big major work on it and it is in a relitivly good area (excellent schools). It does need a complete redecoration though but that wont take DH long.

I have never been very good at making decisions

Just one thing - when you say that labour will not be a cost to you, will this work be done in the evening/weekends? DH will need to be earning some money I take it?

Yes, my brother is self employes so can do work as and when it suits him, mainly evenings and weekends, but even in between jobs etc. DH does work in the day but only 9-4 so will do a couple of hours in the evenings and more over the weekends.

I will help as mum has offered to look after DD for us, but I am pg with DC2 so will have to be careful of what I do. I suspect that the house has not been redecorated since the late 50's early 60's (at an etstimate) so I will have to be careful WRT to the paints used etc.

It depends on the price of the house you need to make a yield of at least 10% to make a real profit and be better off than having the money in the bank.

The fact that your Dh and Brother both work in construction would bother me especially self employed as that will be the first thing people will cut back on.

I would offer 25% less than the asking price and if you get a good deal go for it but if not leave it, because the prices aren't going up anytime soon.

Also I wouldn't want to live next door to my landlord so that's a potential issue too.

Thanks Katie.
DH is an ex painter and decorator he now teaches.
Brother isn't in the construction industry he is a self employed plumber, heating engineer and electrician as is my dad. They both own their own companies and do work for insurance compaines also. Since the financial crisis they have both had to take staff on as their work load had quadrupled They have never had to do this.

Can I ask why you wouldn't want to live next door to your landlord.

Because it would feel as if they were watching all the time and checking up on you.
It's bad enough having 6 monthly inspections where somebody comes into your home and judges you and writes it all down, if that was the feeling you had everyday it would be awful.
Dh's job less of a concern then, with your brother what would happen if he suddenly couldn't pay his half, plumbing comes under construction and I'd still be cautious, the money is running out fast and people aren't remortgaging to put in new bathrooms and kitchens anymore so it might be just the insurance work they have in 6 months time, nothing is guaranteed unlike teaching.

True I see where you are comming from WRT my brothers income, a very good point. That is something DH and will have to sit down with my brother and talk about.

Do you really have 6 monthly inspections I didn't know as a landlord I would have to do that. I never thought of living next door to the tennants as a bad thing only a good thing in that if they have any problems then we are always here for them to come and see us about it.

I really don't know what to do now.

I think we will have to go through the pros and cons and do some more research and probably make a decsion after xmas and the new year,

Thank you all so much for your advice and input.

from a legal perspective, you need to make sure that you have a proper written agreement in place about how you hold the propery, normally a 'declaration of trust'. You need to think about for instance, what happens if one of you wants to sell their share, or what happens if you fall out over what to do with the property. A good solicitor should be able to advise you and discuss the options, but it is an added legal cost. That said, if you do get a good document then it can help resolve any difficulties further down the line

It sounds like a good investment if the property is already keenly priced, if you are not in it solely for profit in the short-term but to give your dd somewhere in the future, if you are not overburdened with debt already and you have building skills. I know several investors going back into the market at the moment because they feel there are bargains out there.

Incidentally, I live next door to one of the flats I let out and I don't think it has put people off living there. However, we do have one tenant who hasalled us in to change a lightbulb etc and we had to set quite clear boundaries with her.