Purchase property or invest ????

izoomzoom

Until a few months ago, my mother lived abroad. She now lives with her brother and visits with me for a few weeks every few months. My mother is in her 80s and no longer wishes to live on her own.

The proceeds from her house sale have now arrived in the UK and is presently earning minimal interest in the bank.

I am inclined to encourage her to purchase a property to rent out and then at least she can earn some kind of income. I would have to manage this on her behalf (perhaps a financial POA but only for the rental property?)

Or do I encourage her to invest it somewhere.

Essentially I would like to keep the bulk of her 'money' secure.

Any suggestions would be appreciated

redmalc

Your predicament is similar to the one I have been tossing around for eighteen months now.
I had made my mind up to buy a property until a friend of mine was having difficulties getting his rent,after six months he managed to remove the tenants and when he got property back he was horrified in its condition and the cost in putting it back to a reasonable condition was 6K

Pincher

Inheritance tax allowance is £325k, or £650k for a couple.
George Osborne is expected to raise this to £1million, if a house is her main residence, but not if it was a Buy to Let.


The capital gains is reset to zero on Probate, so what you want to do is to keep some asset in her name, up to the IHT tax free threshold. The benefit is that she has her own annual income allowance and £1,000 tax free interest from April 2016. If she gifts you all the money, and you invest them in your name, you don't get the benefit of all those tax free allowances.

xylophone

Does your mother have any ideas about what she would like to do?

What happens if your uncle dies first, will he leave her a life interest in the house?

Does your mother have income over and above what can be generated by the proceeds of the house sale?

bigfreddiel

Buy to let is far too risky and stressful and I don't think an 80 year old could handle it, I know I won't want to when I reach 80!

Cheers fj

Eco_Miser

See http://monevator.com/category/deaccumulation-2/ for some ideas about income in retirement. One of the articles is about BTL.

The rest of the site may also be useful.

izoomzoom

Thank you all.

My mother would always have a place to stay. If her brother were to pass first, she will always have a place at mine, although we would need to do some kind of conversion to the house. My mother has a small UK and (foreign country) pension and at the moment, the pensions are much more than her 'pocket money' spends.

My mother does want to gift me (alot of the) money now, but I do not want this. I am a tax payer and any additional income I received, would be taxed. Plus if I used it to pay off my own mortgage, I do not know if I could trust myself to 'save' my mortgage repayment monthly figure, thus reducing her 'capital'.

The money she has is below the IHT threshold, so no big worries there.

I understand that there are risks with BTL but there would no mortgage to pay and I think I would need to contact BTL owners to ascertain their feel on the % of tenants around that could trash the place. I would have to manage the purchase and rental on my mother's behalf, because that is really too much for her.

I'll look into your link Eco Miser.

Broken_Biscuits

either option could end badly over a short period.
since it appears you are the one taking the lead with someone elses finances you will be the one that takes the blame if it goes wrong.

if i had got to 80 without investing in the stock market or as a btl landlord, i wouldn't start now.

looking at the question and not the circumstances...
everything i have read shows historically shares have beaten property and that you would only buy property after shares to diversify. Gearing is not really an option due to age. An 80 year old will not get a loan.

Pincher

izoomzoom wrote: »

My mother would always have a place to stay. If her brother were to pass first, she will always have a place at mine, although we would need to do some kind of conversion to the house.

Be careful not to have her move into a house she gifted to you,
because the HMRC will say it's an attempt to avoid inheritance tax, so the gifting is not valid, so 40% IHT please.

izoomzoom wrote: »

I understand that there are risks with BTL but there would no mortgage to pay and I think I would need to contact BTL owners to ascertain their feel on the % of tenants around that could trash the place. I would have to manage the purchase and rental on my mother's behalf, because that is really too much for her.

My 86 year old mother has been enjoying her Buy to Let income quite merrily, having raised a stupid son who deals with all the boring stuff for her.

AndyT678

Pincher wrote: »

My 86 year old mother has been enjoying her Buy to Let income quite merrily, having raised a stupid son who deals with all the boring stuff for her.

Which is all absolutely fine when everything is just rolling along as expected. No drama, no worries, A OK.

What happens if you get a set of bad tenants who stop paying rent and it takes a year to shift them out? What if they've trashed the place in the meantime and you need to spend £'000s to make the house habitable again? What happens if Mum has a sudden requirement for a largish amount of capital?

These are all real risks that exist with the choice to do BTL. If you have contingency plans to cover those eventualities then great. If not then you've made a choice that is either very ballsy or somewhat uninformed.

It will probably all be fine but, for me, I think I agree with the Broken Biscuits post above.

Pincher

Pincher wrote: »

My 86 year old mother has been enjoying her Buy to Let income quite merrily, having raised a stupid son who deals with all the boring stuff for her.

AndyT678 wrote: »

These are all real risks that exist with the choice to do BTL. If you have contingency plans to cover those eventualities then great. If not then you've made a choice that is either very ballsy or somewhat uninformed.

Over 20 years, I have dealt with most things. Subsidence is a lot worse than non-paying tenants, and I have dealt with both. No house burning down, YET.


With the hassle, comes some really sweet rewards. It's just that she has to die to reset the capital gains.