The Pros and Cons of Investing in Property with a Friend

In this two-minute read, we ask if it’s wise to buy a rental property in Ayrshire with a mate.

Purchasing a buy-to-let property with a friend is an appealing prospect – on paper, at least.

But it’s important to carefully weigh up the risks and rewards before taking the plunge.

Here’s a list of the pros and cons of becoming a landlord with a friend.

The pros

  • The role of landlord comes with a plethora of responsibilities. Sharing these duties with a trusted friend will lighten the load.
  • Your co-investor may have a different skill set to you, meaning you can play to your strengths while they play to theirs.
  • Most lenders require larger deposits for buy-to-let mortgages. Splitting your investment means you don’t have to pay as much cash up front.

The cons

  • You never really know someone until you’ve gone into business with them. If the two of you disagree on how to manage the property, the friendship could suffer.
  • If your tenant falls into arrears, as landlords, you’ll have to stump up the cash. However, if your investor buddy can’t pay their share for whatever reason, you’re liable for the shortfall.
  • You might be on the same page as your friend right now, but people’s circumstances change. Further down the line, your friend may decide that they want to sell up when you don’t, or vice versa.

Tips

If you’re still keen to invest with a friend, here’s how to mitigate some of the risks.

Get a good lawyer 

You need a legally binding agreement that states:

  • How much each party is investing
  • The ownership split
  • Responsibilities regarding bills and maintenance
  • What happens if one or both parties want to sell
  • A dispute resolution mechanism should you disagree on an issue

Get a will

In some cases of co-ownership, if one party dies, the property automatically goes to the other person unless otherwise stated in a will.

Don’t feel pressured

If your friend thinks a formal agreement is unnecessary – they may see it as a sign that you don’t trust them – politely, but firmly, pull out of the deal. 

Without the right paperwork in place, you risk getting caught up in a protracted and messy dispute later on. 

Going ahead based on a wink and a handshake could cost you the friendship and much more if things don’t turn out according to plan.

For more advice on investing in the buy-to-let market, contact me, Janice Molloy at Parkview Property 01292 442888

by Andy

A Landlords Dilemma

To Furnish or Not to Furnish? A Landlord’s Dilemma

In this two-minute read, we ask some questions you should think about before renting out your property in Ayrshire

Once the last lick of paint has been applied and the carpets have been laid, it’s time to decide whether or not to furnish your rental property.

It’s a question that has many landlords scratching their heads. Does a furnished property command a higher rental yield? Or is it more hassle than it’s worth?

What type of rental property do you have?

Certain rental properties need to be furnished. For example, if you own a House in Multiple Occupation (HMO) it’s wise to provide furniture, even if it’s the basics of just a bed, wardrobe, and chest of drawers.

Freehold properties are best left unfurnished so that tenants can make the property more homely.

What type of tenant does your property attract?

Furnished properties are very attractive to short- and mid-term renters such as students and professionals. So, if your property is located close to a university, a furnished property is a good idea.

Students will move in straight from their family homes so are unlikely to bring bulky furniture with them. Professional tenants prefer furnished homes as it saves them money and they can move in quickly.

An unfurnished property is more suitable for families or elderly tenants who rent for the long term and tend to bring their own furniture with them.

Do you have insurance?

If you furnish your rental property, you may want to think about landlord’s insurance to cover any damage that can occur to items within the premises. While this is an additional outgoing, if a large item of furniture needs to be replaced due to breakage or tenant damage, you’ll usually be protected.

Other points to think about when considering furnishing your rental are:

  • If tenants are moving large items of furniture in and out, there is a higher risk of damage to your walls/floors
  • As a landlord, you are not responsible for insuring tenants’ furnishings
  • Tenants in furnished properties can move out easily, so you can get your rental back on the market quickly
  • Depending on the location of your rental and the quality of your furnishings, you may be able to command a higher rent

If you want more help and advice as to the best furnishing option for your Ayrshire rental property, give us a call on 01292 442888

by Andy