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Hey guys! 

 

I am looking into starting a rent to rent business in London and have a question.

 

When taking out new properties, of course as the 'tenant' I would need to go through a credit check to ensure that I can afford the property etc, and of course with each new property we take on. In other words after some time, I could have a few properties against my name, as in what I am 'renting'.

 

My question is will this affect my ability to lend for buy to let? Are these searches on my credit file, hard or soft searches. I wouldn't want any red flags coming up when lenders do their searches.

 

Any advice/help would be great. Have a great weekend!

 

Kind regards
Alex

 

 

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Hi Alex

 

What do you mean by Rent to Rent, just so i'm not misunderstanding this?

 

My understanding of this "model", is that you approach property owners with a contracted rent and sublet rooms to the tenants. As such you wouldn't approach lenders yourself, nor would you be eligible without being on the title deeds. A credit check against you isn't going to give them any more security in this situation.

These contracts will be commercial contracts, and enforcing them would be a matter of the courts and precident, not AST's and so you wont have any of the rights afforded under the Housing Act 1988. More importantly nor will the actual property owner, they still carry all the liability, both financially and legally. 

 

Answering your direct question, BTL lenders therefore wont know about these agreements you have. If a landlord manages to take security over a property you have somehow, that might be something they see, and i'm sure that if lenders know you are operating in this manor they will have little desire to lend our own BTL's, the background risk that they would be unable to assess would be very high.

 

Honestly, i do not understand why a landlord would be happy to hand off profit to a third party, especially given the new tax and ICR rules  squeezing margins) without also reducing their own risk?

043_logo_final_03.png.0cdf828351f81e6097208048ac2d018d.pngStuart Phillips

Independent, Whole of Market Mortgage Broker

AALTO Mortgages Ltd

Web  www.aaltomortgages.com

Email  sales@aaltomortgages.com

Call  020 7183 1101

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Hi Stuart,

 

Thanks fro the quick response to my question, perhaps I should elaborate.

 

Yes rent to rent as a model is as you say, renting a 4 plus bedroom house from a landlord and then renting it out by the room and pocketing the profits. Its not easy, but it is possible, a lot of landlords have tired properties (that we make up to improve our profits), lack of time or just want something that is certain and they don't need to worry about. 

 

We do this through agents, so what I mean is, every time you take on another property, of course the agent will credit check you to ensure you can afford it. So inevitably, one can have quite a few properties they are 'renting' and quite a number of credit checks and referencing done in a short period of time. There will come a point where you wont be able to rent anymore due to affordability and therefore taking on guarantors. 

 

So entirely separate from that. Once I have saved up enough money for a deposit for my next buy to let purchase (which is my main business, rent to rent is simply a short term solution for cash flow to accelerate my ambitions) Will lenders be able to see all the searches done by agents on my credit file for each rental property or each time I sign as a guarantor? And if so, will this affect what I can lend? Of course if they can see that I am renting x amount properties they may be spooked into lending me money.  I have had mixed opinions on this and would like to make sure before I start anything. 

 

Thanks again, I hope that explains it a little better :)

 

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Currently rental payments don't show on your credit profile, and the searches will be soft searches akin to the sort you see when you apply for car insurance or do electronic ID checks. 

 

The agents bit is surprising though, surely you could not demonstrate you have sufficient disposable income to cover the rent on multiple London properties, in addition to your own residential mortgage or rent? (if you did, i'm sure simply saving a deposit would be the fasted route to building wealth). So what is the value of these references to the agents or landlord in the first place?

 

Full disclosure, i feel very strongly about the rent to rent practice. I'm kinda curious as to how agents work in this already busy mix. After all i presume they want a cut too? I don't know what they add nor how the figures stack up after your cut, their cut etc.

 

043_logo_final_03.png.0cdf828351f81e6097208048ac2d018d.pngStuart Phillips

Independent, Whole of Market Mortgage Broker

AALTO Mortgages Ltd

Web  www.aaltomortgages.com

Email  sales@aaltomortgages.com

Call  020 7183 1101

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  • 1 year later...

 

On 8/20/2017 at 5:23 PM, frankfurt rob said:

Did you get the idea from Rob's book, beyond the brick. Asking only I had never heard of this before reading his book. Some people might take roommates but never heard of renting a place out and subletting it.

Nope, it's quite a common strategy to generate some cash without putting a lot of money down here in the UK. I have a friend who does it and I was considering it, but to be honest, never went for it in the end. The returns are good, but its very time consuming, so I stuck with regular buy to let :)

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