Should I invest in this?

Conrad

Thrugelmir wrote: »

Take professional tax advice. In a simplyfied form, effectively they would be gifting you the property in exchange for free life time accomodation. Your purchase cost would be zero so you would be liable for CGT on the entire net selling value of the property. In addition the house would still be subject to IHT on their estate, at the value at the date of transfer to you, when they eventually pass away.

Good points. CGT - presumably I'm only liable if I sell it, which I would not do anyway?

IHT - thier entire estate is not worth more than £250 k now. I cant see in 10 years time anyone bothering to go beyond what is actually left in the will.

Graham_Devon

Conrad wrote: »

Graham is only seeing this from one side - it's by no means a guaranteed pot of gold - how would you feel if I said your family will have to go without potentialy £90k in the next 20 years - money that couldbe spent on your children?

I'm not. I'm taking issue with your full ownership of the property straight away after the first £250 payment.

If this was my parents, and someone was suggesting such a "contract" where my parents don't even get the 50k they want from the property as a lump sum...indeed, no lump sum at all, just a monthly 250 quid, AND they hand over entire ownership of their asset I'd have it torn up in seconds.

That was my issue, and if were honest, if any of our parents had such a scheme offered to them, we'd all be saying no.

£250 and you build up the percentage of the house you own on each payment, or each quarter, fine. But taking ownership from the first £250? Who would sign their parents up to that in all honesty?

ruggedtoast

Conrad wrote: »

I'd really value some thoughts.

Clients of mine age 68, want to release about £50,000 as an equity release loan where no payments are due until the die.

Doubtful any lender will lend as the property is Rema concrete. All prime lenders have thus far declined it as there are long term issues about concrete and UK damp weather - potentially. If the property were to come to market, Halifax and Santander may lend (to non investment buyers), but as I say the issue for any incommer now would be concrete rot or similar long term trials.

Value is £180,000. It would let for £900 pm.



I can offer to pay them £250 pm, index linked for life. They get to remain for life. I would own the property from outset.



DOWNSIDES;

He is very fit looking and could easily live 20 - 25 years - sorry to sound so calous - but pension annuity provider make exactly the same calculations - tis just business.

I would no doubt have to fully refit and refurb when they pass away.
Potential risk the concrete may need major works when they pass on. Concrete is uncertain in UK weather heance why lenders avoid it now.

Property has a swimming pool - even though this is an ex council ordinary house. I'm thinking that if they pass on in 20 years, that will need to be removed - at presumably high cost.

I will have to pay the buildings insurance.

My total outlay (assuming no major concrete overhaul or remedies) over 20 years, say £90,000.

UPSIDE

I own the asset with no debt from day one, albeit with no rent incomming.


What to do?

:rotfl:

Lol, this is excellent.

I think you should go for it, befriend them in the process and force them pork pies every day.

Harry_Powell

Graham_Devon wrote: »

I'm not. I'm taking issue with your full ownership of the property straight away after the first £250 payment.

If this was my parents, and someone was suggesting such a "contract" where my parents don't even get the 50k they want from the property as a lump sum...indeed, no lump sum at all, just a monthly 250 quid, AND they hand over entire ownership of their asset I'd have it torn up in seconds.

That was my issue, and if were honest, if any of our parents had such a scheme offered to them, we'd all be saying no.

£250 and you build up the percentage of the house you own on each payment, or each quarter, fine. But taking ownership from the first £250? Who would sign their parents up to that in all honesty?

You're frothing over nothing here Devon, their solicitor would never allow Conrad to pay them from his own pocket on a month by month basis. Instead the full monies would be held in trust and invested in safe bonds to provide the guaranteed monthly income. I assume Conrad would get a loan to supply the capital and if he defaulted then it would not impact the retiree's.

HAMISH_MCTAVISH

Conrad wrote: »

I suggested she give them £50k or £250 per month instead - she declined.
.

That would be my only concern.

The decent thing to do is make sure that anyone who stands to inherit knows about it and has been offered the chance to do the deal themselves, or come up with an alternative. And that the alternatives such as downsizing to a cheaper house or area have been explored.

If they turn it down, and the deal stacks up, then so long as they've got access to independant legal and financial advice and still want to do it, there's no moral or ethical reason not go for it.

HAMISH_MCTAVISH

Graham_Devon wrote: »

I'm not. I'm taking issue with your full ownership of the property straight away after the first £250 payment.

If this was my parents, and someone was suggesting such a "contract" where my parents don't even get the 50k they want from the property as a lump sum...indeed, no lump sum at all, just a monthly 250 quid, AND they hand over entire ownership of their asset I'd have it torn up in seconds.

That was my issue, and if were honest, if any of our parents had such a scheme offered to them, we'd all be saying no.

£250 and you build up the percentage of the house you own on each payment, or each quarter, fine. But taking ownership from the first £250? Who would sign their parents up to that in all honesty?

I think most people on here would be pretty horrified if their parents did such a deal. If my relatives needed funds I'd tell them to sell their property and I'd buy or rent them a flat to live in.

But who knows, maybe the people in question are permabears and genuinely believe houses will be worth 80% less in 20 years....:D

Conrad

ruggedtoast wrote: »

:rotfl:

Lol, this is excellent.

I think you should go for it, befriend them in the process and force them pork pies every day.

As a sweetener I've just offered to keep them in Bensons and booze for life, and as I'm a fair minded bloke I'll throw in a lifes supply of Richmond sausages.;)

Seriously though - I've left it with them and just come off the phone advising them to sell it and downsize. I don't know how easily it will sell given the concrete.
The whole deal doesn't get me excited - he literaly looks like a bloke of 45 - way to fit for this to be profitable, darnnnn.

RabbitMad

how much would a £250 per month annuity cost for a 68 year old? About £84,000 at a rate of £28 per £1pa income.

therefore you would basically become an annutiy provider. You're actually offering a very good deal. £84K when he only wants £50K. Maybe you should add in a five year guarantee such that if he dies the 1st 5 years payments are made regardless.

silvercar

What happens if he needs residential care? Would the local authority consider him to have deliberately deprived himself of assets?

The other question is what are you going to do with the property once the guy leaves? Presumeably you would have difficulty finding a buyer due to the Rema issue. I guess you intend to let it, but what happens when you decide you don't want to be a landlord or if legislation comes in requiring tenanted properties to reach a certain energy performance level that is not possible with a Rema build?

carolt

I preferred your pasty shop idea, Conrad.

The world needs more pasty shops.