Mortgage-free property options

jm9481

Hi all

I was hoping someone could help me with a problem. It is a nice problem to have, but is causing me some trouble at the moment.

I have recently had a family property in London put into my name. It is mortgage free and worth about £800k. This is, of course, extremely lucky.

As part of the arrangement, I have to continue to make a monthly payment to the previous owners of the property in lieu of the lost rental income, and I also have to pay the service charge on the property (£6k per year) as well as council taxes, and all the usual bills. I will now have to also finance any repairs, replacements and maintenance costs that would previously be borne by the landlord myself. The cost of the property to me is therefore c £2,000 per month, which is unsustainable.

As this is a family property, I cannot sell yet or rent to the public. I plan to sell the property in ten years time.

My thoughts are that I have a valuable asset and no other debts and should therefore be able to borrow against the value of the property. There must be an intelligent way of doing this that would enable me to finance the payments, however my cash outgoings for the property make a standard loan with monthly repayments unhelpful.

As far as I can tell, I have two options:

1. Borrow on an interest only basis to pay the fees and repay the loan when I sell the property in ten years time. However getting an interest only loans seems to require a very high income, despite having debt free assets
2. Borrow to fund a buy to let, and use the rental profits from the second property to pay the fees.

I hope I have explained this clearly. Does anyone have any thoughts on this, or any other ideas? There must be something I can do...

Brock_and_Roll

Presumably living in it is not an option?


I understand that the "deal" is that the property stays in the family, but why on earth cant you rent it out? Seems crazy to have a valuable asset standing empty costing money to "the family" - not something I guess that the generous donor would appreciate with their business hat on.

lovinituk

jm9481 wrote: »

2. Borrow to fund a buy to let, and use the rental profits from the second property to pay the fees.

You reckon you can borrow enough to purchase a BTL that will give you £2k a month after expenses and tax?! You may as well buy this family property for the amount it will cost you to 'rent' it for the next 10 years.

jm9481

Sorry. I should say that I currently live in it

lovinituk

Is this part of a larger BTL portfolio and has been put in your name to help reduce the tax bill of the other family member?

If you can't afford a mortgage to 'buy' it then give it back and say they can give it to you in 10 years time.

Sounds like you're being royally stitched up. Expected to pay rent but also all the maintenance too!! Doesn't sound like a great deal in the short term if you can't afford it.

System

+1, you're being stitched up like a kipper. Can guarantee that the money you're paying them doesn't appear on any recorded income the tax man sees.

If it were me I'd sell it. If its in your name you can do what you like unless there is a legal agreement in force which both parties have signed. Same applies to paying them the lost rental income, without a legal agreement I'd tell them to go whistle and just make loud noises about tax evasion. Being your property, which is what it now is, I would expect to be liable for the service charge and repairs but I wouldn't be expecting to pay the former owners so much a month.