Buying property from family

ceejayblue

My son's future in laws own a property that consists of a shop, a flat above and a car mechanic's workshop at the rear. It is close to a railway embankment and this year they were finally told, after years of legal toing and froing, that Railtrack would not pay for the cost of the subsidence at the property that was "probably" caused by works they carried out on the embankment.

The shop is currently let and father in law uses the workshop as his business premises and the flat is let out. There are cracks in the property and the building needs underpinning at the front (back was done previously I understand). The windows are the old metal casement windows and in dire need of replacement and the whole flat needs a refurb.

Now, the problem is the in laws have offered the property to my son and their daughter for £150,000, they say that the property is worth £225,000 (not sure where they got that figure from). The shop currently gets around £500 pm rent and the flat £450pm. The workshop could possibly pull in another £500+ pm. Problem is they are estimating the works to do a total refurb inc underpinning would be around £80k! My question is, considering they are getting it cheap(?) would they be able to get a mortgage on it in its present state and would it be a buy to let mortgage (they will live in the flat initially) or a normal repayment one? Her parents think this is a good deal for them as it will give them an income in the future but I'm not sure that this is a good deal for them. They are getting married in 2008 and intend having a 3 month honeymoon going round the world so money will be tight when they get back.

Has anyone got any advice on this?

Thanks

Cara79

Hi there

Ok, I don't know much about this, but from what you say there are alarm bells ringing with me.

Would a mortgage lender even lend on a property with subsidence? Do all the insurance companies etc know? Does your son and future daughter-in-law want to be tied down with this?

If they bought it to initially live in, then they'd get a residential mortgage. If they then let it out, they may be given approval or it might have to transfer to a buy to let mortgage.

Also, do the figures stack up to do a buy to let? Would you son and daughter in law even be able to raise that amount of capital to do it up in addition to the mortgage?

What indication has your son made about it?

It all sounds far too messy to me, and surely they would want their own home.

Maybe the best thing would be for them to get proper financial advice that wont be biased by the daughters family.

x

Edited to add - if it's such a good investment ...... why are they selling??? Sounds fishy

never_enough

Tend to agree with above.

Sounds fraught with financial & emotional problems. I don't know if they could get a residential mortgage if it's not all residential, surely it's more commercial? I believe underpinning can (should?) be covered by the company that currently insures the property. I'm sure it would affect the chances of getting a mortgage, or of some kind of retention from the bank until works were carried out.

Hard for you to get involved, especially with 'in-law issues' but you could suggest they get 3 estate agents (commercial ones I guess?) round for a valuation, then do the same with builders for the works needed. Then they need to see about mortgages... That might be enough to blow it out of the water.

IMHO it would make more sense for the in-laws to sell the place. If they wanted to they could still give the kids the differance in cash to put down as a deposit on a place when they're ready. Or does the FIL want to ensure his business stays there but needs the cash from the sale?

Ivrytwr3

I don't see how they are getting it cheap. Valued at approx £225k, they want £150k, but there is approx £80k worth of work to do. That's £230k in my book to get it up to scratch.

Or do you mean it's it's worth £225k the condition it is in now?

Agree with the above, who needs this type of hassle when setting up home? What if they can't get tenants, what about if they get problem tenants? etc

In-laws should sell property and help with a large deposit towards the daughter's & SIL's first place.

Way too complicated................!!!

clutton_2

a 3 month round the world honeymoon sounds like a lot of money to me !!! Might some of this money be better spent on their future investments ? (i know this makes me sound like a kill-joy - sorry !)

thesaint

Surely it depends on whether your son wants the hassle of leasing commercial property? If he has no idea about commercial lettings, then with the other problems it is probably best not to go near it. The fact that you are on here asking seems to me that it isn't something they are happy in taking on.

MortgageMamma

From a mortgage perspective the shop and the workshop would have to be mortgaged commercially. The flat itself may be able to be mortgaged residentially. but there are a number of factors that will make this difficult, that being the structural problems, the proximity to retail and industrial premises and the location near a rail track. A lender will not like any of these things - there may also be issues with the tenure of the property due to the shop being over a flat - they would be VERY LUCKY to get a residential mortgage for more than 65% loan to value and the rate would be questionable too.

As for the commercial situation - again structural problems and potentially tenure problems, and also the workshop will likely have structural issues if its located near the tracks also.

I think if your son takes this on, its going to turn out more hassle than it is worth, and I personally don't think the discount is good value either in the circumstances. If they were my clients they would be warned to give it a wide berth - this is no gift from the future inlaws, it is an iron ball round their ankles - tell son to take proper financial and legal advice, and not to be pressured by anyone - I'm sure I dont need to spell this out but making a bad investment at this age could have major repercussions both financially and emotionally for years to come.

clutton_2

how i agee with mortgagemamma - sounds a bit like an unintentional poisoned chalice to me.

MortgageMamma

I think so to - in all honesty its probably the girls parents pride and joy - their achievement - and they probably think they are doing the couple a favour giving them their "investment" so cheap - which is a nice thought, but sometimes its just better to make your own way in the world - quite frankly i wouldnt take that property on if it was giving to me, unless i could knock it down and build something else !

everythingblogcast

They could take it to the high court for damages.

MortgageMamma

Just forgot to add, if your son really is expressing an interest in buying this property, make sure he gets an independent full structural survey on both the properties by a RICS registered surveyor. Mortgage surveys in situations like this are just not good enough, and you will need a surveyor who is acting in your best interests not the mortgage companies. If you are looking for commerical mortgages you need a broker with a good panel, or preferably whole of market for commercial mortgages. Expect to be charged a fee upfront for this kind of service. If you want any help with the kind of questions to ask when speaking to the broker let me know - I dont do commercial anymore myself but I know the right things to ask