Flat Rental Dilema

[PeteMacleod]

I've just bought a 3 bedroom flat with a mate. I will be living in one of the rooms and renting two other rooms out while my mate is just in there for the investment. We have just come back to the topic of how the rental income will be split and go towards the mortgage and we are at a major disagreement. The Mortgage monthly re-payments are approx 650/month. each room would be rented at approx 325/m.

I thought that The first rented room should go fully towards paying off the mortgage then room 2 and 3 (Say I will be living in room 2) will both put half their rent towards paying off the mortgage and this then covers the mortgage. And my mate will take half the rent from room 3 for himself.

He Says this would be unfair as I am living there so Rooms 1 and 2 (where I will be) should cover the full mortgage repayment and he keeps any rental from room 3 for himself.

Am I being irrational here or is he correct that it is unfair on him only recieving half the rental from room 3?

I would love to hear a few other un bias opinions on this matter!!

[Nosha123]

Three rooms being rented at 325 per month = 975. Pay mortgage leaves 325 which u split between you.

[marden40]

so basically, your mate wants you to pay half the mortgage @ £325.00 p/m.......someone else pays the other half......and he pockets £325.00 p/m.........have you been mates long?.......he's priceless....

[Nosha123]

Good point marden!!!!

[julia-mag]

It doesn't matter Who is living in the flat, the only concern is the income it generates, 3 x £325 = £975 Pay the mortgage and split the profit !. Thats what would happen if it were three strangers living there, so why should you pay more than anyone else!

[sinderella]

surely ,its only fair if your mate lives in room 2
i think you should both take all the income which includes your rent ,pay the mortgage and split the rest.

[hc4361]

You are getting the benefit of living there, don't forget, whereas your investing partner has to pay rent/mortgage elsewhere.

[PeteMacleod]

Thanks for the input everyone. As I said I do agree with you all I was just shocked when my good 'mate' came out with that comment and needed some reasurance that I was talking sense!!

[PeteMacleod]

ok hc, i just missed ur answer there. remember he will still be getting money out of this even though he is not living there, taking half the rent from one room. Is that not fair enough?

[hc4361]

This is clearly an issue that should have been sorted well before the decision to buy.

I assume you are tenants in common and own half each equally. You are getting a benefit he isn't and that must be taken in to account. Technically you should be paying him rent.

From your calculations the two other rooms will raise £750, making £100 per month profit from your joint investment, plus the rent you pay for the third room.


You need a discounted rent, he needs a bit of return

[johnny37]

Havent looked at this in detail but hc is correct. You should be paying 50%rent on the 2 rooms you are living in (you cant pay rent to yourself). Other costs like ground rent and maintenance charges need to be costed in as well.

[PeteMacleod]

Ok hc I see your point of me benefiting over him, and I agree I probably should be paying slightly more than him but not actually paying him full rent so I think some kind of happy medium is needed

[marden40]

I honestly can't see where you are benefiting more than your mate........you have got to pay for accommodation, where ever it is.......the fact its mortgaged in your's and your mates name is irrelevant, you still have to find the £350 p/m for your room etc........rent out the other two rooms and give your mate £175.00.......I suppose you could argue that your share of the profit can go to the room, but so can his.......where ever he lives.

[johnny37]

marden, The room Pete is occupying is shared ownership (50% each) Petes friend is therefor entitled to claim £175 rent on that room as if it were let to someone else. I assume that expenses like mortgage, council tax, ground rent and maintenacne charges are inclusive. After the rental income has been divided (£350 to Pete, £475 to the mate) all the expenses are spit down the middle.

[johnny37]

Sorry, those figures are based on £350 rent, but you get the gist. I also should have said to avoid any acrimony that the rent for Petes room would presumably be less than 50%, but not zero as that would mean the relationship would not be equitable.

[johnny37]

Ill get it right in a minute. The correct figures are £325 to Pete, £487.50 to the friend, less any discount the friend may wish to give to remain friends. Then split the expenses down the middle.