Opinions please!

lippie67

Hiya

My brother and I have recently inherited my mums house. The property is worth about £230k. My brother has approx 150k mortgage outstanding, I have approx 95k. The property is split 50/50. We are also in the fortunate position that we will have approx 100k other monies (50/50 split again). Still would rather have our mum though

So, the question is....

Do we sell?
Do we rent?
Do we partially remortgage (to raise money to partially pay our mortgages) and rent?

Or something else?

My brother would like to retire in 10 years and we dont want hassles so would envisage we would put it with a lettings agent (we were quoted 8% and she supposed she could rent it for 1, 000 pcm.

If we are to rent it, then we would possibly need to rewire it and also put new windows in - other than that, it had a makeover inc new bathroom, boiler and kitchen 5 years ago.

Obviously, I appreciate that I am asking for your opinion on this - so any information you can give me would be great.

thanks

marliepanda

If I were in your shoes I would sell and pay off my own mortgage and 'enjoy' the rest of the money. I wouldnt get into letting it.

Main reason is the hassle, but also you are renting out your mothers home, who you were clearly very close to. Would you be able to emotionally detatch yourself form the property and accept that any tenant you may have may not live in the same way as you/your mother. I know that I wouldnt.

Thats just me though

DadDee

If you can rent the property @1000pcm you get an yield of about 4.2% after accounting for agent's fees and some vacant periods pre tax. Reduce this by your effective tax rate.

If the interest rate on your mortgage is more than the post tax yield on the rental then you are better off selling and paying off your mortgage.

The above calculation assumes house prices are flat.

motherofstudents

Sorry to hear about your mum. In my opinion, paying off your mortgages would be a priority. You could then look at various investments, preferably a spread to reduce risk. It comes down to your personla preference in the end, do you want to become landlords ? Whichever you go for, make sure you read and investigate as much as you possibly can. Don't go into it unless you have your eyes wide open.

Kynthia

Letting a property is an ongoing responsibility even with a managing agent. You need to comply with legislation such as gas safety certificates, energy performance certificate, etc. The property must be safe and maintained for the tenant, so ongoing repairs must be done. There will be fees to find tenants, along with checking them in and out, you may have void periods with no tenant or a bad tenant who doesn't pay you rent and you have to go through the court eviction process. You need a buy to let mortgage and you need to declare your income to the HMRC and pay any tax due on it. It can also be upsetting to see how someone else treats your mum's house.

Unless the yield is fantastic and you've always wanted to be a landlord, I can't see that it's the best option.

[Deleted User]

A friend of mine and her brother inherited the family holiday home and turned it into a holiday letting home for 10 years. She then bought her brother out as he had a very good work pension but she had none and this turned into her pension (she continues to let it out and lives on the rent).

Do the sums carefully. Cost exactly how much you would need to spend on it to bring it up to a standard where it can be let out successfully (get 3 quotes). Try to get recommendations for a local letting agent (I've heard good and bad stories about them from a friend who does this - and who recently had to change hers).

ALSO - how well do you get on with your brother? If you have a good relationship, it may work out well. If not, then it may be better to just sell it and split the money now.

Personally, I'd get rid of my mortgage, but I'm not very money savvy (and fairly risk averse) I would suspect that someone with more entrepreneurial spirit would advise you to hang onto it as a continuous money earner for the future (especially as the future of pensions is far from certain ... )

googler

Sell it and use the proceeds to pay off mortgages and buy some investments which will give you a passive income, or speculate to whatever risk level you're happy with.

Your brother will have around £15k left over after settling his mortgage, you'll have £70k by the above figures.

Your brother could get £5k or premium bonds, £5k ISA, £5k in a high-interest account, or some other mix

You could go £10k on stocks & shares, remainder in high-interest account.... various possibilities


Using a letting agent does not relieve you of 'all the hassle' - you're still the landlord who has to comply with all the legislation and obligations. Read up on these. Don't rent it out unless you can truly regard it as the business asset that it will be, and unless you can divorce yourself from it as a 'family' house.

BitterAndTwisted

Put the property up for sale and do whatever suits you for your long-term investment plans separately.

No-one knows what the future holds and although the two of you may be in accord about what to do now, that may not necessarily hold true if your circumstances change at some point in the future.

I appreciate that it might be a wrench to say "goodbye" to your mother's home but it could be a wrench to have complete strangers living in it as well. Unless the property is in London or the South East you are not likely to see a huge increase in value over the next few years, so you probably won't "lose" that much by selling it soon.

lippie67

Thanks everyone for your replies - lots to think about x