buying a house for my sister to live in

kbr

just after some advice about how we could do this!

some background info: I received £50k in inheritance last year and have invested some, paid off some debts, bought a car and have some left (about 14k).

My sister has just moved into our spare bedroom after being made homeless (long story but not her fault - she lived with our mother!). Anyway, this is fine short term but we have a 5 year old and new baby so house pretty hectic at moment! My husband and I have discussed buying a second property and letting her live there, paying us what the mortgage costs each month so not making any money etc but would be a long term investment for us. Also discussed this with my sister who is quite excited as it would be her first place on her own. Having played about with figures, she could afford the place so thats not an issue. We have spoke to our financial advisor who mentioned a dependant relatives mortgage but can't really find much info on them so don't know how this works. We would be putting 10-15% deposit down.

Does this sound like something we could achieve or anybody have any advice as to how to go about this?
many thanks

PasturesNew

What if she doesn't rent it from you? Can she really afford to? What is the LHA for her (age-depending it'd either be a 1-bedroom or a shared house rate).

As a knee jerk reaction, it's quite common, but you have to think long-term - and the long-term is that she moves on, never likes it, can't afford it or simply doesn't pay you the rent.

kbr

Thanks for your reply and I appreciate the thoughts.
We have had very long discussions with her about making sure she is aware of the commitment, costs involved etc. She is also aware that if we do this then we don't go into it lightly and she does understand this. She also knows that living with us is a short term solution as we can't sustain this therefore had already looked at renting a property anyway. She does has a good full time job so I'm not worried there plus, quite simply, I trust her. We have already said she would be involved decisions when looking for a place and the decoration so hopefully it will also be somewhere she liked that was a good investment for us too.

Geenie

Kbr, I think it is lovely what you are doing for your sister, and I would do the same for my brother also, who I love dearly.

BUT, age and experience also tells me, and my brother would also feel the same now that we have hit the half century, that it is vital you get good independant advice and make sure that everything is done to secure your investment from any future problems.

I have seen countless times, families falling out over money, property etc, and it is heartbreaking, when once loving families are divided. I am not saying this will happen, but your sister may acquire a partner who moves in one day, and the dynamics could change between you.

If you are going to be investing a lot of money, getting good solicitors is a must, and heed their advice on how you should proceed to protect yourselves. Don't skimp on doing anything a LL should do, get a AST drawn up, deposit and enjoy your income, but pay your tax. Good luck OP, and your sister is very fortunate to have you and OH.

Pumpkinface_2

There are some reputable financial organisations providing dependent relative mortgages, I found several with a quick google search. Intelligent Finance, Abbey, Nat West. The main advantage of buying a property for dependent relative is that there will be CGT relief when you come to sell and I think another benefit might be more favourable rates than on an investment property.

The trouble is, you will not be eligible as your sister does not qualify as a dependent relative. Additionally the relative must occupy the house rent free and you must bear all the costs, but as I say, she does not qualify anyway. You need to look into getting mortgages for an investment property.

You can refer to the following factsheet.

http://www.hmrc.gov.uk/pdfs/2002_03/capital_gains/ir283.pdf