How can my 13 yr buy a house

ladydukes

My daughters father died a few months back and she has been left from his pension enough money purchase a house if she wanted to. After looking at the rates banks/isa's pay, we found we could buy a flat that would give her a 10% return. after a lengthy discussion and many weeks researching she has decided to invest.

Problem, and am a working mum of 3 on child tax credit top up, so I cannot buy or own the house as the money made on the house would be classed as MY income even though it would be going into a saving account she cannot have till she's 18. and I wouldnt get get TC which I rely on to feed my family.

How do I get around this one. as She doesnt want the excess funds locked into a trust as she what to use them to benefit herself, EG: the yearly school ski trip, driving lessons and a car at 17 etc.

Pixie5740

A minor under the age of 18 cannot own land or property in the UK, so it would have to be owned in trust by trustees, e.g. parents, for the beneficial ownership of the child.

Any asset owned by a child under 18 and unmarried, derived from the property of the parents that produces income of more than £100 per year, is taxed on the parents as the parents income.

I'm not sure of any way around this.

Wyndham

I think the short answer is that she can't own property until she is, I think, 18.


I'd suggest that the money be split, some put aside for a future house purchase, the rest put into a more accessible place so she can get to it for the things she wants to pay for now.


I'm sorry she lost her dad, and maybe the best way to honour his memory is to be sensible with the money, while also having some fun!

Pixie5740

I'm also curious at how you reached the 10% return figure. Have you and your daughter spoken with an independent financial advisor to get some other suggestions as to what to do with the money?

ladydukes

Pixie5740
the 10% return is on a flat for £33,000, that currently have a tenant on a long term contract with a yearly rent of £3800. so by the time we pay boiler insurance etc its more than 10%.
we live in south wales.....properties are VERY cheap here...lol

PS. I have spoken to a family friend who is a FA and he suggested it would us the best return as investment in stocks etc wouldnt give us the same return.

SuzieSue

Pixie5740 wrote: »

A minor under the age of 18 cannot own land or property in the UK, so it would have to be owned in trust by trustees, e.g. parents, for the beneficial ownership of the child.

Any asset owned by a child under 18 and unmarried, derived from the property of the parents that produces income of more than £100 per year, is taxed on the parents as the parents income.

I'm not sure of any way around this.

Does she have grandparents or uncles or aunts who could act as trustees? I am almost sure that the income could then be treated as her own.

antrobus

ladydukes wrote: »

My daughters father died a few months back and she has been left from his pension enough money purchase a house if she wanted to. After looking at the rates banks/isa's pay, we found we could buy a flat that would give her a 10% return. after a lengthy discussion and many weeks researching she has decided to invest.

Problem, and am a working mum of 3 on child tax credit top up, so I cannot buy or own the house as the money made on the house would be classed as MY income even though it would be going into a saving account she cannot have till she's 18. and I wouldnt get get TC which I rely on to feed my family.

How do I get around this one. as She doesnt want the excess funds locked into a trust as she what to use them to benefit herself, EG: the yearly school ski trip, driving lessons and a car at 17 etc.

The money inherited by your daughter from her deceased father's estate already constitutes a trust.

See http://www.hmrc.gov.uk/trusts/types/vulnerable.htm

Pixie5740

ladydukes wrote: »

Pixie5740
the 10% return is on a flat for £33,000, that currently have a tenant on a long term contract with a yearly rent of £3800. so by the time we pay boiler insurance etc its more than 10%.
we live in south wales.....properties are VERY cheap here...lol

PS. I have spoken to a family friend who is a FA and he suggested it would us the best return as investment in stocks etc wouldnt give us the same return.

What kind of long term contract do you mean? A 12 month fixed Assured Shorthold Tenancy or an Assured Tenancy? The difference is important.

Edit: Also if the yield is so good why is the current landlord selling?

ladydukes

SuzieSue wrote: »

Does she have grandparents or uncles or aunts who could act as trustees? I am almost sure that the income could then be treated as her own.

No not really. she has aunts on her father side but we haven't seen them for years and beside they absolutely hate me, so I wouldn't get involved with them
I have a foster sister and foster mother, as they are not blood related to her would they do?

princeofpounds

You will not get 10% per year net.

You seem to be assuming it costs only £500 per year to rent out the house.

I can assure you it will cost significantly more than that.

I would start off with deducting an amount for voids. Typically 10%, so £380.

Would you be using an agent? That's probably another 10% off, although it is optional.

£500 for insurance, from what you say.

This is all before actual maintenance. There will be regular ongoing costs of course - drain unblocking, occasional painting or carpet replacement, loose tiles, tap washers. Parts plus call-out charges, so it's rare that you'll be paying under a hundred pounds a go. These things typically happen at least twice a year.

Then you have the bigger ticket items which you can put off for a long time, but need to be budgeted for. Roof. Doors. Re-pointing. I'd be bugeting a few hundred for this every year too.

You have to be very realistic about these things.

One of the reasons properties like these have such high gross yields is that the rental amount is so low in asbolute terms that it is burdensome to fund the ongoing maintenance and care of the property.

The net yield is often fairly disappointing, unless you do a lot of the work yourself or have efficiencies of scale.

Having said all that, you may still do better than a savings account, although you will have to invest a lot of time as well. It is not as ridiculous an idea as investing in inflated areas of the country. Just behard-headed about it.

ladydukes

Pixie5740 wrote: »

What kind of long term contract do you mean? A 12 month fixed Assured Shorthold Tenancy or an Assured Tenancy? The difference is important.

Edit: Also if the yield is so good why is the current landlord selling?

its a the first one. but Ive spoken to many agents in the area and there is a high demand for 1 beds, as most of the property is 3 bed terraced houses, and since the bedroom tax thing there are waiting lists. The owner is selling because he has numerous properties and is nearing retirement he wants to down size his portfolio. this is not the only property in the area he has for sale.
The tent has been in the flat for 5 years and has asked that he stay on. probably for the above reason.

Like I said we done our research.......besides we could cjoose from about 500 other properties in our price range giving the same yeld.