Helping sisters family

namvet

Hi

I have just found out that my brother in law has be playing the stock market and has lost a small fortune. It transpires that he has now put up the family house for sale and is looking to sell. I want help and was thinking that I should maybe buy the property and rent it to my sister. The estate agent valued the house at 400k and bro-in-law said he will sell it to me for 380k. He says that once he has paid all his debts he will have 200k left over which he will put into my sisters account and won't touch.

I already have a rental property and have about 80K in the bank to try and obtain the mortgage. The rental income in the london area is about £1000pcm.

Do you think that purchasing the house is the right thing to do to help my sister and keep a roof over the kids heads?

Are there any other options?

Thanks in advance.

David_White

What happens the first time they've had a tough month and can't pay you the rent?

Family and money don't mix in my opinion, especially in the type of situation you've described above.

charliewocka

A lot of BTL lenders won't allow renting to family members....

Debtslayer

namvet wrote: »

Hi

I have just found out that my brother in law has be playing the stock market and has lost a small fortune. It transpires that he has now put up the family house for sale and is looking to sell. I want help and was thinking that I should maybe buy the property and rent it to my sister. The estate agent valued the house at 400k and bro-in-law said he will sell it to me for 380k. He says that once he has paid all his debts he will have 200k left over which he will put into my sisters account and won't touch.

I already have a rental property and have about 80K in the bank to try and obtain the mortgage. The rental income in the london area is about £1000pcm.

Do you think that purchasing the house is the right thing to do to help my sister and keep a roof over the kids heads?

What did brother in law plan to do after house is sold? Where is he thinking they will live?
Has he put the house up for sale without your sisters knowledge? I guess your sister knew nothing of his gambling on stock market?
Does this really sound like a man you can trust:
A) to put the 200k into your sisters account
that he will pay rent to you every month without fail

i wouldnt trust him to do either

Malmo

Find a different way to help that doesn't place so much risk on you. Your proposal is not a good one. Renting to family also requires a regulated BTL loan from one of the few lenders that do them and so the financing is treated like a owner occupier mortgage when it comes to establishing affordability.

ViolaLass

Are they not able to rent another place?

namvet

Thank you for the replies.

So their plan is to sell their property and then rent the same place off the buyer for the next 4 years. They have a written agreement drawn up to do so.

I was also thinking is it lawful for my sister to sell the 400k property to me for 250k, i take out a 10 year repayment loan and they will pay off the mortgage through the monthly rental? After the 10 years I will sell back the property at the same amount that I bought it for. I will obviously get them to cover the income tax over that period. Will there be any issue with tax when i sell it back?

Thanks Again.

noh

namvet wrote: »

Thank you for the replies.

So their plan is to sell their property and then rent the same place off the buyer for the next 4 years. They have a written agreement drawn up to do so.

I was also thinking is it lawful for my sister to sell the 400k property to me for 250k, i take out a 10 year repayment loan and they will pay off the mortgage through the monthly rental? After the 10 years I will sell back the property at the same amount that I bought it for. I will obviously get them to cover the income tax over that period. Will there be any issue with tax when i sell it back?

Thanks Again.

Yes it is lawful for your sister and brother in law to sell the house to you undervalue.
If you sold it back to them at the same price there would be a potential Capital Gains tax liability because it would be a sale to a connected person and the disposal value for CGT would be the market value at that time not the £250K paid.
Essentially you would be liable for CGT on the difference between the market value when sold back to your sister and the £250K you paid for it.

http://www.hmrc.gov.uk/manuals/cgmanual/CG14560.htm
http://www.hmrc.gov.uk/manuals/cgmanual/CG14540.htm

Yorkie1

namvet wrote: »

Thank you for the replies.

So their plan is to sell their property and then rent the same place off the buyer for the next 4 years. They have a written agreement drawn up to do so.

I thought that sale and rent back wasn't possible in most situations either?