Buying a house outright for my sister...

ShanTats28

Hi everyone,


I need a bit of advice if possible. I am in a position to buy a small property outright for my sister to live in and charge her rent based on what the mortgage repayments would have been.


I have been googling similar situations but can't find anything suitable to help.


Would I still be classed as a landlord if I own the property outright and would a tenancy agreement need to be drawn up?]


Would it still be classed as a commercial let and would I need to adhere to all the legalities that come with it ie, having a gas safe certificate for any gas appliances?


Obviously I want the property to be safe for her but I am unsure of how we would go about doing this!


Any help would be appreciated.


Thanks

tacpot12

You would be classed as a landlord and the income (rent) would be taxable. The money you spend maintaining the property can be offset against the income to reduce the tax you pay.

You will have to meet all the normal landlord obligations of keeping the building in good repair, and having the gas appliances inspected on a yearly basis, but your rent should cover these costs. I'd recommend you have a tenancy agreement, but you don't need to take a deposit so can avoid the requirement for using a Deposit Protection Scheme. CGT will be payable on any gain in the property value when it is sold.

Your should update your will to say what should happen to the property if anything happens to you.

ShanTats28

Thanks, this is really helpful.


Would I need to register with my local council as a landlord? This is the bit I am unclear on and need the most advice, I understand getting the EPC certs and gas safe certs from accredited person etc but I don't understand how I 'register' as a landlord or if I need to at all but still carry out the above?

yoshiyella

If you are going to charge your sister what the mortgage payments would be then why doesn't she buy it using a mortgage - least that way she will own it at the end?

marksoton

So you're aiming to profit from your sister?

How bizzare.

agrinnall

And if you already own your own property then you'll have to pay the 3% extra stamp duty on the one for your sister.

The other thing is, what's in it for her other than a place to live that may be cheaper than renting from another LL? If that's all she wants that's fine, but you might want to consider actually treating the payments as if they were mortgage repayments and after the value of the house has been recovered by you then she would own the property.

ShanTats28

I am in no way trying to fleece my sister. She will only pay me what the mortgage would have been and I intend to cover everything else.
Yes this is a risk but unfortunately my sister is not on a income that she can afford somewhere by herself (we have calculated that this house is well within her means) and she has epilepsy so I want to make sure she is somewhere safe and secure so she doesn't have to worry about the landlord selling up or increasing the rent extortionately or paying renewal fees.
My aim is not to make money, just get monthly payments back until the total house price has been paid off.

xylophone

Why not lend your sister the money to buy a property and take a first charge on the property?

Your solicitor will be able to assist with the paperwork.

She can repay you only capital or capital and interest as required - you would declare the interest for tax purposes.

marksoton

ShanTats28 wrote: »

I am in no way trying to fleece my sister. She will only pay me what the mortgage would have been and I intend to cover everything else.

Last time i looked mortgage companies were for profit organisations.

What do you mean everything else?

booksurr

ShanTats28 wrote: »

Hi everyone,

I need a bit of advice if possible. I am in a position to buy a small property outright for my sister to live in and charge her rent based on what the mortgage repayments would have been.

I have been googling similar situations but can't find anything suitable to help.

Would I still be classed as a landlord if I own the property outright and would a tenancy agreement need to be drawn up?]
yes

Would it still be classed as a commercial let and would I need to adhere to all the legalities that come with it ie, having a gas safe certificate for any gas appliances?
yes

Obviously I want the property to be safe for her but I am unsure of how we would go about doing this!
it depends where you draw the line between killing your sister or not

the gas safety inspection and annual is the only thing required in law that you must do

landlords are advised to follow the electrical safety inspection requirements (a Periodic Inspection Report") but it is not a requirement. However, if the electrics kill her and you did not have the relevant paperwork to hand you would be "done" for failing to take due care

read every word of GM's guide for new landlords (link below) and every word of each link therein because you are liable for loads of things you have no idea about even though she is your sister. Obviously you will also have to pay the higher rate SDLT when you buy and declare the "rent" for your own income tax

https://forums.moneysavingexpert.com/discussion/5180214

ShanTats28 wrote: »

Would I need to register with my local council as a landlord?

only if the rental property is in Scotland. You do not need to register as a Landlord if the property is anywhere else in the UK since it is not going to be a house in multiple occupation, it is only going to have your sister in it (plus partner if she wants of course)

ShanTats28

xylophone wrote: »

Why not lend your sister the money to buy a property and take a first charge on the property?

Your solicitor will be able to assist with the paperwork.

She can repay you only capital or capital and interest as required - you would declare the interest for tax purposes.

Could you explain in more detail what a first charge entails? I have not heard of this before?


Would she first have to pay tax on the money I gave her, would it be classed as a gift it is to buy property with etc?