Seller landlord providing deposit to buy

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    Seller landlord providing deposit to buy

    I am a landlord looking to grow my portfolio, my current way of funding my deposit money, is to buy, re-vamp and remortgage 6 mnths later, to try and get back some of my original deposit money to help with cashflow. However, I know a landlord who wants £75k for his property, and mentioned if I paid £95k he would give 20% back on completion (which would fund my deposit required). The house is worth nearly £95k, but is it legal to do this? Has anyone done it? The ROI is still good? Thoughts please??? Thanks

    #2
    Sounds a little like fraud, but IANAL so likely I'm wrong.

    And when, after completion, he doesn;t give you the £19k???
    I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

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      #3
      I thought mortgages eligibility was based on the lesser of the market price and price paid. As such this will either fail at the first hurdle or you are probably looking at money laundering.

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        #4
        I've seen loads of adverts on Rightmove where the seller is giving cashback on completion, there's 1000's of them so there must be a way, it even happens as an incentive with new house purchases, it's all dealt with via the solicitors from what i understand, he gets his £75k, I get a house (with £19k of invisible equity). I've seen loads of adverts where the seller is giving 10% cashback on completion to help first time buyers to get on the property ladder. I can prove I have that much in my bank from the mortgage companies point of view, I am just looking at ways to maximise my money, and was curious about the adverts I have seen.

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          #5
          Any incentive by the vendor/builder has to be disclosed , failure to do so is fraudulent. Once disclosed the valuer will discount the amount when arriving at their valuation. An additional element is that you will have to show to your broker/solicitor that you are committing the difference between the "Agreed Price and the loan being applied for" and those funds cannot be miraculously conjured up in to your bank account as the lender will want sight of such monies including any building society/bank savings account. It falls under the Money Laundering Act.

          My advice is don't get drawn into this transaction, it has all the hallmarks of procuring finance by the utterance of false declarations and REMEMBER you will also be paying the 3% Stamp Duty Premium on a higher and false Purchase Price. Stay Clean, you have more to lose than gaining a pecuniary financial advantage.

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            #6
            Thanks loanarranger, much appreciated.

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              #7
              Sorry I couldn't provide different advice.

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                #8
                I'd expect the transaction to have CGT implications for a landlord (which wouldn't impact a first time buyer).
                The £20,000 you receive is either income or a capital gain crystalising (I suspect the latter).

                You can't just magic £20k into a business.
                When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

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                  #9
                  There are some cases where small payouts are treated as being reductions in the cost of acquisition, so that, when you sell, it would be on the basis that you really paid £75k, not £95k. However, I think that over 20% back might not be covered by that, in which case, I think it might be taxed as income.

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