Inherited house - sell or rent?

lulu650

My friend has inherited a house jointly with her brother from an elderly uncle.

Structurally sound but it's in a bit of a state inside. Brother wants to sell as he's shortly moving abroad, friend is considering buying him out, making good the house and renting it. She may be able to use cash funds rather than getting a mortgage.

The longterm plan is investment for her children. But she may sell as the market picks up.

My only thoughts were to get 3 valuations on the house as is and offer brother half the average price. Also make sure they both check there's nothing valuable left in the house

Any other advice or ideas from posters?

david29dpo

Sounds fair but you can get as many valuations as you like but it may not be the selling price. What tends to happen in these cases is the sister wants to pay half the selling price (the lower) but the brother whats half the valuation price (the higher)

Old_Git

I am no expert but if she inherited 50% off the house this would be tax free .
If she rents it out it then becomes a BTL business and any PROFIT would be taxable when she sells .

david29dpo

Any BTL profit is taxable, even if she never sells!

clutton_2

she will have to pay capital gains tax on it when she sells it if she has used it for BTL

poppysarah

How many years off are her children from needing their own home?

missile

BTL is not as profitable as your friend may think.

I would encourage her to do some simple sums.

House worth £2000,000, rental income £1,000/ month, deduct 20% expenses agents fees, maintenance, voids etc. Profit before tax 4.8%. It is not difficult to better that with cautious investment portfolio, even LTSB Vantage card pays 4% with no risk.

1 bad tennant could trash her property. On the plus side house prices are rising in some areas.

CLAPTON

the tax situation is as follows:

Any property that is not your principal private residence PPR (i.e. one in which you actually live) is liable to capital gains tax when it is sold. In the case of an inherited house the gross gain will be the difference between the selling price and the acquisition price which will be deemed as the value for probate.

If you never live in the house then it makes no difference if the house is simply kept as a holiday home or left empty or let out

You do however have a personal CGT allowance currently 10,100 pa
With joint ownership both people can use their CGT allowance.
Thereafter tax is at 18%

If the property is let out, then income tax is payable on the profit from letting... this is the difference between income (rent) and allowable costs

lulu650

Lots of useful information and appreciate all your replies.

My husband inherited half a share of a house worth £75,000 mid 1990s. At the time we were reluctant to buy his nieces and nephews out due to our own financial circumstances. House worth about £220,000 now. Different times of course but I had been talking to my friend about that.

Sounds like less of a headache for them to clear and clean it and put it up for sale.