How can my 13 yr buy a house

Owain_Moneysaver

Purchasing a property may make sense because

• There's no mortgage to pay, so rental returns can be less and still be profitable even if more has to be spent on repairs and voids
• Even if the house depreciates, it's still a house and the daughter will presumably need somewhere of her own to live in future
• If the daughter moves into the house at 18 as owner-occupier, it probably won't count as assets and deprive her of any benefits. Having any other assets, whether in investments or a property which she rents out, probably will.

Having said that, the 'bedroom tax' is almost certainly temporary in the longer term as it's politically unpopular, and 1-bed houses/flats tend to be the first to be affected by any downturns in the housing market. The bedroom tax doesn't affect private lets anyway, only under-occupied social housing. Private lets are subject to local housing allowance and tenants can have any property they want but housing benefit will only pay up to the LHA level. A small 1-bedroom at LHA rental will usually appeal to single people on benefits and that can be a difficult tenant profile for an amateur landlord to manage. It can be very profitable for the professional landlord with a portfolio, but hard work, which is probably why the existing owner wants to retire.

A 2-bed offers more flexibility in letting and in the future your daughter can get a lodger or have room for a child bedroom.

Tax and benefits rules can of course change dramatically in the future.

Better_Days

Just to check - you have clarified the position re the length of the lease left, management fees, sinking fund, any large cost maintenance projects coming up, crime map for the area?

The point made about the bedroom tax is a good one, and I wouldn't make a long term decision like a property purchase with any reliance on its continuance (or the current levels of LHA for that matter)

Being a LL can be a great deal of hassle and rent isn't guaranteed. There may well be voids between tenancies or tenants who can't or wont pay and it takes months to evict them. Then you will have to get the property in a position so it is suitable to re-let. In the circumstances you have described I wouldn't purchase a leasehold property as an investment.

Property may have the best potential for a good return, but it certainly also has more potential for a great deal more hassle than say stocks and shares. Property is also relatively illiquid - stocks and shares are much more easily realised.

sofiar

Would the terms of the estate not advise a trustee for her?

xylophone

Has this money already been paid out? In whose favour was the cheque drawn or into whose account was the transfer made?

It would seem to me that a minor could not give valid receipt for the money so that an adult would have to accept it on her behalf as her Trustee.

It would appear that she is absolutely entitled to the money and is sole beneficial owner, so that such funds would be held in Bare Trust.

If you are the Trustee however, and would be able to access the funds and use them as your own, then it could quite conceivably raise questions concerning your benefits? It might be necessary to prove that you were not accessing the funds or that if accessing them, the proceeds were used solely for the child's benefit.

The child would have the absolute right to access and control of the funds in a bare Trust at the age of 18 (16 in Scotland).

If you propose using the money to buy a property, ( and a minor cannot hold real estate in his own name), then I think that you would need to take legal advice as to whether your powers as Trustee permitted you to do this- if the property is purchased, it might be better for there to be two or more Trustees, particularly from the point of view of the benefit situation.

It might even be an idea for the solicitor to be one of the Trustees as is the case with a family trust with which I am acquainted.

Remember that there are many regulations concerning a landlord's responsibilities.

Remember too that you would need to be responsible for sorting out the minor's tax affairs.

All in all, take qualified advice.

booksurr

I second xylophone.

your daughter has received the death benefit payment from her father's pension scheme. http://www.out-law.com/en/topics/pensions/general-pensions/death-benefits/
the only thing that means is it falls outside of inheritance tax rules but you say father was destitute anyway so IHT was never going to be an issue to start with

further it appears you are talking about a significant sum of money which your 13 year old child may or may not already have an absolute right to do with as she pleases notwithstanding her age. As the money came direct to her via the pension fund trustees, ie she was the person nominated by the father to receive it then you as her mother have no right to say what she does with it, but you can of course guide her...

However, you will have to formally establish a trust (be that a bare trust or another form of trust) if "she" has decided to invest in property and may, or may not be eligible to claim the vulnerable person trust status, but one thing is certain income is going to be produced from the lump sum investment and therefore tax must be declared and paid correctly and so you need a professional to set it up for you, you can't DIY it given your obvious lack of technical knowledge

ladydukes

BigAunty wrote: »

Also, you need to factor in Capital Gains tax when your daughter sells it in the future. To understand how this works and to model some scenarios for its future expense, see the HMRC website.

thought Capital gains tax only kicked in after £250k.

booksurr

ladydukes wrote: »

thought Capital gains tax only kicked in after £250k.

as said your technical knowledge is wanting

the only tax with a 250k threshold is stamp duty land tax

for CGT the tax free threshold is £11,000 for an individual but that is irrelevant since the property would be held by a trust and therefore subject to the much harsher rules over trust CGT for example the allowance is half of an individual's value so is only £5,500. Furthermore a trust pays all its CGT at the higher rate of 28%
http://www.hmrc.gov.uk/rates/cgt.htm

moneysaver1867

As a tenant, I share princeofpounds' concerns that you have underestimated the cost, and effort, required in letting a property. Even the most immaculate of houses need general maintenance.

Will you be managing the property yourself? Have you thought about how you will pay for ad hoc repairs and maintenance? Will you be able to respond quickly, if a tenant's problem is urgent?

My current landlord is happy to take my money every month and hasn't done a single piece of work of maintenance on the house since I moved in 10 months ago, despite me reporting at least a dozen problems (three of which have been fairly major). So I'm voting with my feet and looking elsewhere. I doubt the landlord will be able to find a new tenant immediately, unless he acts quickly to resolve the serious damp problem, which means the property could be standing empty for quite some time.