Trying to Help my sister...

mini8334

My sister is not Financially savvy. I am not a novice but also not a certified FA.


I am worried my sister is making a poor choice since she has come in to money. The background:


My sister had shares in here company of employment that recently sold leaving her with 100k. of which she has paid of her debt of £30K. £70k remaining....


She currently has a property that she owns with H2B at 20%.


She bought this property for £360,000 with 10% deposit in 2013.


It is now valued at £450,000. Meaning the H2B it £90k.


Her idea is: Re-mortgage and pay off the H2B and rent the property for £1800 per month. The, buy another property for her and her "new boyfriend". Who is contributing £10k overall....


Her new property is £385k.


She has a mortgage broker who she states is also an FA... and believes that this is a good idea and has mortgages agreed in principle for the Let property (5yrs Fixed), new property (2yrs fixed).


Her BF earns £18k per annum
She earns £110K per annum (60% of which is commission aka risky)


My view is that this is a high risk investment and with an IR move likely she could end up struggling in 2yrs... what with Brexit providing uncertainty.


My suggestions was reduce your risk and sell the current property. Increase the LTV on the new property and lock in for 5yrs.


Or am I risk adverse? My worry is:
IR rise
Not having tenants for a period
Cost of insurance
Strapped for cash
Already over stretched.


If you have any experience or advice that I could pass on I would appreciate your guidance!

ProDave

Someone who has just realised £100K of shares, and earns £110K per year does not fit my understanding of "not financially savy"

aneary

Advise her to protect her money seeing as she earns nearly £100K more than her partner.

How does she have so much debt when she earns so much or is this a new employment?

gycraig_2

Doesn't sound like she needs any financial help tbh.

110k a year and 100k in shares, better than 90 percent of the population

Mossfarr

Maybe you could suggest she joins this forum for some pointers regarding the responsibilities she would be taking on as a new landlord.

Other than that it seems your sister is doing very nicely without your help.

ratechaser

ProDave wrote: »

Someone who has just realised £100K of shares, and earns £110K per year does not fit my understanding of "not financially savy"

A high salary does not automatically equate to financial sophistication. My dear wife earns more than that but if it wasn't for me pushing her all the time, I suspect all our money would be sitting in a bank account at 1%.

mini8334

Great Guys thanks for your advice!


I will not be wasting my time with the unhelpful troll comments. I have obviously not made myself clear enough for you give productive advice.


For those of you that were able to add some value; thanks.

ReadingTim

ProDave wrote: »

Someone who has just realised £100K of shares, and earns £110K per year does not fit my understanding of "not financially savy"

You're confusing luck with skill, but sound jealous and resentful either way.

Bossypants

Serious question, but has your sister actually asked you for your advice?

Coconut01

Does your sister know what being a landlord involves? It's not something to do without serious thought.

How new is the new boyfriend? I'd be encouraging her to protect her investment in anything they do together.

I'd go down the safer router if it were me, but then i don't fancy being a landlord.

tlc678910

Hi OP,
You could make sure your sister knows that purchasing a second property will mean she has to pay an extra 3% stamp duty. E.g. If her new property was 400K she would need to pay 12K over and above the ordinary stamp duty that would still apply.

You could also make sure she knows that higher rate tax payers can no longer deduct all of their mortgage interest before calculating their tax due on a rental. The result of this is that even if the entire amount of rent received paid an interest only mortgage with no profit or capital repayment then tax would still be due. Make sure your sister investigates these tax changes and understands what they mean for her and her tax liabilities.

At least she can know what she is taking on with her eyes wide open.

Tlc