How do I calculate a fair figure to buy my brother out?

ThePants999

MyOnlyPost beat me to it :-( but Mossfarr, good news, we're all QUEUING to go into business with you. You have a remarkably generous view of what you're entitled to by putting in half the up-front investment!

Mossfarr

Chill out people it really doesn't matter one jot what you, me or the pope think. Its about what the OP and HER brother think (sorry for getting your gender wrong OP).
My post was simply an alternative suggestion to give the OP food for thought.

At the end of the day the OP, her brother (and probably their parents) will work this out themselves, hopefully after having enjoyed the comments from the nutters on here . (not aimed at any individual I include myself in that)
Who knows they may even seek proper professional advice.

eamon

The OP has seen the property rise in value. In other circumstances and indeed in many places within the UK it could have just easily been static or fallen. Of course we can only deal with reality. IMHO a 50/50 split after fees & any taxes is the best solution (unless the brother is exceptionally generous)

xylophone

The OP is the sister!

She and her brother bought the flat with a gifted deposit and a joint mortgage.

Presumably the flat is owned as tenants-in-common.

She has been living in this property which she jointly owns with her brother who has never occupied it and now lives abroad with his wife and child.

She has paid the whole of the mortgage but has financed it with rent from the lodgers - the lodgers are occupying the jointly owned property and therefore there is an argument that the brother's share of the mortgage is at least partially covered by the rents.

And he has the right to a fair share of the capital gain - he'll be paying tax on it!

joanna183

Thanks, everyone, for the debate and potential solutions! Really useful for me to hear differing opinions. To add some more of my 2 pence in:

1) I am indeed female :-)
2) I would definitely split it by the rise in value, not by the initial deposit.
3) The general consensus seems to be a 50/50 split +/- home improvements if my brother and I agree on this

And a big lesson learnt - decide this before going into a purchase with another party!

saajan_12

The massive difference in methods is coming from the capital paid off (and property value increase on that portion).. The question is what was the idea for the brother at the outset?

A) To invest 5% (in a house) - > Brother gets 5% of the current value, profiting ~£10k

To co-own a house and share the risks/rewards of a LL / owner occupier (e.g. rent voids if you moved out/couldn't rent other rooms, major repairs etc) -> OP and brother split the below 50/50 :
Current value - Selling costs - Repairs costs - Mortgage value

* I think selling costs are fair as that is a prerequisite to achieving the valuation
* If the brother is sharing the increased capital as an owner/LL would, I think he should contribute to 50% of repair costs rather than the house price value to that

getmore4less

If you want to keep the ownership 50:50 you need to assess the share of the debt the brother has left from their share of the income the property made.

You have not given us any numbers to have a chance at helping you work that out.

One way would be as I said before you work out a virtual rent pot with the lodger money and your rent.

you split the original debt 1/2 each and apply the bother share of income to that bit of debt to work out what is left.
you do the same for your share of the income and any extra you paid and see what you have left.

Together is should be the residual mortgage.

fairly easy to do with a mortgage calculator or a spreadsheet.

some simple numbers to give you the idea.

mortgage £280k 25y @ 4% say £1500pm

in 5 years you owe. £242,430

Rooms rent for £400pm you+2 lodgers is £1200pm

brother has been paying £600pm off his debt and you covered the rest £900pm

so now we have two virtual mortgage after 5y
£140k @ 4% £600pm £131,160
£140k @ 4% £900pm £111,270

split the house £525,000 50:50 less your shares of the debts
he gets £131,340
you get £151,230

if you like that idea can work on the investment,repair and maintenance costs as they should get factored as well.