Inherited a property: Advice needed ?

sigur

Hi all,
A relative passed away late last year and left me a flat in their will.

Its the only property I own and Im now looking to buy a larger place to move into later in the year.

What would be the most cost effective way of purchasing a new property: Should I rent the flat out and use the rent as part of my mortgage payments ? (local rents for this type of flat are around £500 pm)
or
Should I sell up and use the money as a large deposit on a new larger property?

sa1

Hi

If you sell your property you hand all future equity release to someone else.
( I at times have had to sell properties due to finances etc ).

Say every five years for the rest of your life you remortgage the property and pull out £10,000 to spend as you like (use as deposit on more Buy To Let Props maybe). Some years props go up 1% , 4%, 10% , 15%, (-2% very rarely!)

Once you sell a property other than your main residence you must give 40% of that to the government!

Alfie_E

sa1 wrote: »

Once you sell a property other than your main residence you must give 40% of that to the government!

That’s not quite right. You have to pay tax on any gains. After allowances and any relief, you are taxed at your marginal rate. If you’re a basic rate tax payer, the initial part of any taxable gains will be taxed at the basic rate. Only if the amount of taxable gains pushes you into the higher rate band do you start paying 40% tax.

If you were to choose not to live in the flat, capital gains would be calculated from the date of death of the relative. As you received the flat as a gift, there’s no purchase price to work from. Instead, a fair market value is used – the price you would have expected to pay for the flat had you bought it. You might like to ask the person who administered your relative’s estate for the value they used for probate and inheritance tax purposes. However, it should be noted that this could be lower than the market value that you would want to use. This is because it’s normal to look at the money you would get for immediate disposal, which would typically assume a property auction. It would be a good idea to get a couple of different estate agents to give you a written valuation. (Free and easy to get if you suggest you’re considering selling.)

As to what’s the best idea, no-one knows what the property market is going to do. If you believe the pessimists, there’s too much buy-to-let property out there, you won’t let it and the whole market it going to crash. But, these pessimists have been around for a good few years, and prices have still kept going up and up.