House Doctor: 'My co-owner is useless. Should I stick it out or cut my losses...?'

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The Independent Online

Question: My friend and I bought a house in Birmingham in 2006 to let to students. However, my co-owner has been a disaster, with little money for maintenance and isn't interested in dealing with tenants. Should I sell or is it worth persevering for a long-term investment?

Dave Smith, Reading

Answer: David Hollingworth at broker London & Country said: "If, since buying, you've been able to make money on the property – either down to a rise in capital value or from rental returns (or both) – now could be the time to walk away."

But Melanie Bien at Private Finance says: "If your investment has fallen in value since you bought it and your mortgage is greater than the value of the property, selling up isn't viable. Get your rental property valued to see where you stand and if there is a shortfall and you convince your friend to sell, then you'll both have to make up the difference."

Although he would be responsible for half the loss, it sounds as though you may struggle to get it from him and the lender would hold you both liable. So if the relationship doesn't work out and your friend can't – or, more crucially, won't – pay, the bank or building society can legally go after you for all the money.

Your reluctance to let go of such an asset is understandable. Despite the current stagnant market, property should be a decent investment over a longer-term 20- to 30-year timeframe, although nothing is certain.

Yet you do have an alternative, says Andy Montlake at broker Coreco – buy your friend's share of the house: "This could be arranged with your existing lender via what's known as a 'transfer of equity', which would see you either giving him a cash sum or increasing your own debt for his half of the property."

In the latter case, increasing the mortgage to pay your friend for his share, you'll also have to fulfil the mortgage lender's criteria for buy-to-let, adds Ms Bien. "If the property has appreciated in value since you bought it, you would have to give him half of that increase and you would be taking the full debt on yourself, so the lender would want to ensure you have a good credit rating and earn enough to satisfy its requirements," she says. The property's rental income is taken into account as well, so affordability shouldn't hopefully be a major issue. Whatever you do, you'll definitely need his consent.

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