inherited a house, to sell or rent?

cloud_dog

somethingcorporate wrote: »

£7,200 gross income on a £170k house is pitiful.

Using these base figures, excluding costs, you get a yield of 4.24% on the value. I think if you were to speak with 'seasoned' people who rent they would likely not see that as viable/good enough return.

Is it possible your £600 per month figure is incorrect? Have you asked an agent to price it for renting?

steampowered

Keep_pedalling wrote: »

Although it states that, there is nothing to stop your adult child claiming his inheritance now

Just to clarify. This would only be the case if the will created a "bare trust".

I don't think the Op has given us enough information to know whether he is dealing with a "bare trust" or not.

There is only a "bare trust" if the beneficiaries were unconditionally entitled to a fixed share of the trust property. For example, if the will gave the property to "such of my grandchildren as survive me and attain age 25 years", that trust would be conditional on the grandchildren surviving to age 25. This would not be a bare trust and the children would not be entitled to ask for the property at 18. Click here for HMRC's guidance stating this, as posted by xylophone in post 4.

I would also point out that, if a bare trust has two or more minor beneficiaries and holds an asset that cannot easily be divided (for example, land or a building, or a majority shareholding), the older beneficiaries are not entitled to have the legal title to the asset transferred to them when they reach 18 but must wait until the youngest beneficiary reaches 18.

steampowered

Op - if the will provided cash of £170k, what would you do with it. Would you buy a house? Or would you buy stock market investments?

Your two key considerations would be (1) how you can get the best return, and (2) being able to access the money.

If you want to let the house out, you should also consider the work and responsibilities involved in being a landlord.

I personally would sell the house and use the money to buy a fund investing in balanced stock market investments. Perhaps using a Junior ISA.

This would give the children a reasonable return and would allow the flexibility of being able to give them their investment when they reach 25. It would also give you the flexibility to use part of your investment to help with university etc. if necessary.

The children are all different ages, so you would need to sell the house to release their equity in a few years anyway.

xylophone

There is only a "bare trust" if the beneficiaries were unconditionally entitled to a fixed share of the trust property.

See "prescient" link in post 4 above.

Keep_pedalling

steampowered wrote: »

Just to clarify. This would only be the case if the will created a "bare trust".

I don't think the Op has given us enough information to know whether he is dealing with a "bare trust" or not.

There is only a "bare trust" if the beneficiaries were unconditionally entitled to a fixed share of the trust property. For example, if the will gave the property to "such of my grandchildren as survive me and attain age 25 years", that trust would be conditional on the grandchildren surviving to age 25. This would not be a bare trust and the children would not be entitled to ask for the property at 18. Click here for HMRC's guidance stating this, as posted by xylophone in post 4.

I would also point out that, if a bare trust has two or more minor beneficiaries and holds an asset that cannot easily be divided (for example, land or a building, or a majority shareholding), the older beneficiaries are not entitled to have the legal title to the asset transferred to them when they reach 18 but must wait until the youngest beneficiary reaches 18.

True, I was rather assuming a bare trust based on the fixed percentages going to each child (hope that uneven gifting does not create issues between the children in coming years)

kidmugsy

Pincher wrote: »

There's something called Deed of Variation.

A DoV must be agreed by all beneficiaries who are affected by it. The two minors aren't legally capable of agreeing. So the DoV would have to be limited to varying the terms for Mum and the oldest one.

getmore4less

Pincher wrote: »

There's something called Deed of Variation.

If you really want to, you can request to do something else.
For example, it seems to me eminently sensible to use the money for university.

I meant the kids, not you going to university.
Well, hmm.....

You can't use DOV on the minors shares.

AnotherJoe

Amanda1970five wrote: »

hi, thanks for that info, Ill look into it

the real issue I have at the moment is more concerned with deciding which is more financially beneficial - to sell or rent and if I sell how the money can best be invested.

• If you had been just left cash to deal with, would your first instinct be to go and buy a house to let out?
• If it was, would it be this particular house?

Assuming the answer to both of those is no, and almost certainly no to the secodn one even if it was yes to the first, why then would you even consider letting it, (even before you look at the many years of hassle and complex tax returns you'd need to manage, let alone the impossibility of splitting the sums up as beneficiaries get to an age they are due their share).

Sell.

MyOnlyPost

I am a landlord and I would not even consider buying a house with less than an 8% yield as when you take off fees and expenses realisticaly it's more like 4-5% maybe 6% if nothing goes wrong.

Second to that I would never consider renting a house out to which I had an emotional attachement so assuming (never assume, I know) you have inherited from a parent how would you feel if a tenant trashed it? My mum considered renting her house so that she could in turn rent a bungalow. I advised her that if she sold her house she could buy two smaller ones with the proceeds and increase her rental income by 50%. Not all houses are suitable for buy to let.

Finally before doing anything you need professional advice as to your tax position. Selling the house you may be laible for Capital gains tax, holding the money after sale would affect any means tested benefits you may receive and investing the money after sale, any returns would be deemed to be income and affect tax credits. There are ways around these issues but it's too complex for most people to properly advise

gien

I inherited my mum's house and rented it out instead of selling it - i didn't need the cash at the time and interests rates were low.

It's been a good investment for me. I have had good tenants and a reasonable yield and the value has almost doubled since I inherited it. Sure, I've had to do repairs and stuff but I've had a (small) income and I still have the house in good condition. It probably depends a bit on where you are and what the rental market is like.