Pooling resources with parents to buy a second property

Robbie100

I’m quite surprised at some of your comments. It’s common for parents to make provisions for their children. I am not asking these questions on my behalf – I am asking these questions on hers. Of course, she will see a solicitor or if necessary an accountant, but I wrote this post to get information and to be steered in the right direction by people who might have done something similar or have the relevant knowledge. I’m not competing for inheritance. I’m an only child. My mother simply wishes to get her affairs in order in a way that is tax efficient and will allow her to retire how she wants to.

The answer is quite simple. Your mother can't put you in a secure financial position. The only person who can do that is you.

My opening line of the first post was : “I am a 29-year-old only child who earns £40,000 a year. I have £60,000 pounds in savings”. Does that sound like I am in a financially insecure position?
You’re assuming I made no contribution to the property my mother owns which I have always lived in. Her property was a Right to buy property. I paid off the entire endowment shortfall which was nearly as much as the property. You’ve even gone so far as to talk about home care fees and her pensions assuming she doesn’t have any other reserves. You’re forming a view on the topic by assuming other factors have not been dealt with or could not be dealt with. Which is not the case.

Cakeguts

Robbie100 wrote: »

I’m quite surprised at some of your comments. It’s common for parents to make provisions for their children. I am not asking these questions on my behalf – I am asking these questions on hers. Of course, she will see a solicitor or if necessary an accountant, but I wrote this post to get information and to be steered in the right direction by people who might have done something similar or have the relevant knowledge. I’m not competing for inheritance. I’m an only child. My mother simply wishes to get her affairs in order in a way that is tax efficient and will allow her to retire how she wants to.

The answer is quite simple. Your mother can't put you in a secure financial position. The only person who can do that is you.

My opening line of the first post was : “I am a 29-year-old only child who earns £40,000 a year. I have £60,000 pounds in savings”. Does that sound like I am in a financially insecure position?
You’re assuming I made no contribution to the property my mother owns which I have always lived in. Her property was a Right to buy property. I paid off the entire endowment shortfall which was nearly as much as the property. You’ve even gone so far as to talk about home care fees and her pensions assuming she doesn’t have any other reserves. You’re forming a view on the topic by assuming other factors have not been dealt with or could not be dealt with. Which is not the case.

So your mother exercised her Right to buy an ex council property but you paid off the endowment shortfall?

Do you want to find a way to get that money repaid to you if your mother sells the flat or do you want your mother to remortgage the flat to let you have it?

You can't tie up any money that your mother has either earned or inherited that is hers because that is the money that might be needed to pay for her care home fees.

So if you want to get the money out of the flat that you put into it you need to take advice on how to do that. Probably the simplest way to get it would be when your mother sells the flat to retire but I expect that you will need evidence of the fact that the extra money came from you and that you wanted it back not that it was a gift from you to your mother.

In the UK people are expected to pay for their carehome fees if they have a property or savings. For your mother this is great as it gives her more choice of which care home she wants to make her new home. So this money has to be available for her to use for this purpose after all it is her money.

It is normal now for people to have to accept that they might not inherit any money from their parents if the parents need residential care. This applies to all children as well as single children.

00ec25

Robbie100 wrote: »

. Her property was a Right to buy property. I paid off the entire endowment shortfall which was nearly as much as the property..

so you "helped" your mother by securing, as your own inheritance, a RTB now worth >£1/2 million which your mother apparently could not afford to buy in the first place otherwise there would not have been a shortfall.

you now wish for her to invest more of her money in stuff you own to avoid inheritance tax. As I mentioned, it won't work, she will either be caught by the GWR or (less likely) by a POAT

Cakeguts

Since you are asking this on behalf of your mother thank her kindly for her suggestions but please tell her that she can't make you financially secure by trying to leave you money that should have been paid in tax or used as carehome fees. It just isn't possible for her to do this.

She can now stop worrying about it because she can't help you out like this.

Robbie100

Detroit wrote: »

You want your 66 year old mother who is mortgage free, to get a secured loan to buy you a house.

She will work until she's 75 while also taking on the responsibilities of a landlady, while you're out of the country.

You, who will contribute £60k will eventually own two properties.

Your mother, who currently has £550k in assets, will eventually have nothing but her two pensions.

Is it me.....?

No not at all please read the posts again. My mother currently owns an apartment. I didn’t think I had to go into minute details and say things like I paid for half of it because that’s irrelevant to the questions I’m asking. You have read my posts and jumped to a set of conclusions rather than engaging with the questions beings asked.

Of course I’ll seek expert advice I’m just trying to get pointed in the right direction and have people with experience of these matters appraise the idea.

My mother wants to work to 75. She does not need to work. She could retire now and never touch her two pensions. Should her health deteriorate it will have zero impact on these plans.
When she retires she would like to retire in a house with a garden as she enjoys gardening.
She does not want to sell her current property in central London. She does not want to move out of London. How do we square that circle? How does my 66-year-old mother who wants to retire with a garden and heaven forbid put her son in a favourable position eventually achieve that in a tax efficient way.

I assumed it would be difficult for her to get a mortgage because of her age which is why I suggested she get some sort of remortgage / secure loan to be paid off by the rent her flat generates. I assumed it would be difficult for me to get a mortgage because I work internationally and I’m self-employed.

My mother would not be a landlady. She’d have nothing to do. I’ll be 2hours away in Paris.

Cakeguts

Robbie100 wrote: »

No not at all please read the posts again. My mother currently owns an apartment. I didn’t think I had to go into minute details and say things like I paid for half of it because that’s irrelevant to the questions I’m asking. You have read my posts and jumped to a set of conclusions rather than engaging with the questions beings asked.

Of course I’ll seek expert advice I’m just trying to get pointed in the right direction and have people with experience of these matters appraise the idea.

My mother wants to work to 75. She does not need to work. She could retire now and never touch her two pensions. Should her health deteriorate it will have zero impact on these plans.
When she retires she would like to retire in a house with a garden as she enjoys gardening.
She does not want to sell her current property in central London. She does not want to move out of London. How do we square that circle? How does my 66-year-old mother who wants to retire with a garden and heaven forbid put her son in a favourable position eventually achieve that in a tax efficient way.

I assumed it would be difficult for her to get a mortgage because of her age which is why I suggested she get some sort of remortgage / secure loan to be paid off by the rent her flat generates. I assumed it would be difficult for me to get a mortgage because I work internationally and I’m self-employed.

My mother would not be a landlady. She’d have nothing to do. I’ll be 2hours away in Paris.

If she can't get a mortgage because of her age she can't get a mortgage. She will have to sell the flat. I have no idea why she would want to hold onto a flat that she doesn't live in anyway.

How do your propose that she makes the mortgage repayments if the flat is vacant and there is no rent coming in or even that she gets a tenant who stops paying the rent and it takes her a minimum of 6 months to evict them through the courts? If you are going into Buy to let you have to do research on Buy to let. Don't just rely on gossip that you have heard about the level of rents in the area of the flat.

For a buy to let investment to work you have got to have the flat occupied as near to 100% of the time.

Robbie100

00ec25 wrote: »

so you "helped" your mother by securing, as your own inheritance, a RTB now worth >£1/2 million which your mother apparently could not afford to buy in the first place otherwise there would not have been a shortfall.

you now wish for her to invest more of her money in stuff you own to avoid inheritance tax. As I mentioned, it won't work, she will either be caught by the GWR or (less likely) by a POAT

You’re now having a dig at the Right to buy policy. It had little to do with affordability. That wasn't the central reasoning behind the policy. It's not so much securing my inheritance merely contributing to costs of the home I live in - and have always lived in. In the same way somebody would if the property was not ex- local authoirty.

I’d also point out that if we're not for leaseholders created through the right to buy Council Housing stock would have disintegrated long ago. It is leaseholders particularly those living in flats who bankroll social housing though leaseholder charges and major works bills. Both of which more than cover the original discount recieved. Those who are tenants contribute virutally nothing. So I don’t accept your point.

It’s my understanding that my name can be added to the current lease as a joint Tennent and I wouldn’t be subject to IHT. I live there and have always lived there. It is not so much inherence tax we are trying to avoid because I’m quite sure by the time it’s due the Government would have raised the band anyway because of property prices, particularly in London. In fact i'm certain they would have.

I was trying to manage this project in a way that might avoid the increased stamp duty on buying a second property. If that can’t be done that's fine we'll just have to pay it. That's not the issue.

The real substance of these posts is securing a loan at 66 to buy a second property in a way that gives the bank confidence that you can pay back the money. That's the central point of every post i've written. The only reason i have detached myself from this is because I work interntionally and i'm selfemployed. I assumed it would be hard for me to get a mortgage. I'd certainly be able to afford one that's not the issue and if you guys who are in the know suggest going down that route it would sove this entire issue.

Cakeguts

Here you go this is what people expect to get for £2,500 per month http://www.rightmove.co.uk/property-to-rent/property-70657949.html How does your mum's flat compare to that?

Cakeguts

Robbie100 wrote: »

You!!!8217;re now having a dig at the Right to buy policy. It had little to do with affordability. That wasn't the central reasoning behind the policy. It's not so much securing my inheritance merely contributing to costs of the home I live in - and have always lived in. In the same way somebody would if the property was not ex- local authoirty.

I!!!8217;d also point out that if we're not for leaseholders created through the right to buy Council Housing stock would have disintegrated long ago. It is leaseholders particularly those living in flats who bankroll social housing though leaseholder charges and major works bills. Both of which more than cover the original discount recieved. Those who are tenants contribute virutally nothing. So I don!!!8217;t accept your point.

It!!!8217;s my understanding that my name can be added to the current lease as a joint Tennent and I wouldn!!!8217;t be subject to IHT. I live there and have always lived there. It is not so much inherence tax we are trying to avoid because I!!!8217;m quite sure by the time it!!!8217;s due the Government would have raised the band anyway because of property prices, particularly in London. In fact i'm certain they would have.

I was trying to manage this project in a way that might avoid the increased stamp duty on buying a second property. If that can!!!8217;t be done that's fine we'll just have to pay it. That's not the issue.

The real substance of these posts is securing a loan at 66 to buy a second property in a way that gives the bank confidence that you can pay back the money. That's the central point of every post i've written. The only reason i have detached myself from this is because I work interntionally and i'm selfemployed. I assumed it would be hard for me to get a mortgage. I'd certainly be able to afford one that's not the issue and if you guys who are in the know suggest going down that route it would sove this entire issue.

In order to be added to the lease your mother would have to give you half of her flat. This will be seen as deprivation of assets if your mum has to go into a carehome because it will be seen as her trying to pass money in the flat to you.

In any case if your mum has to go into a care home and the fees eventually use all of her savings she will be obliged to sell the flat to pay the fees. If it is suspected that she transferred part of the flat to you in order to keep that money out of the carehome costs then it will be up to you to pay for her fees while that money still exists.

Your scheme is so complicated. The simplest way is for your mother to sell the flat buy a house with a garden and invest any money left over.

You say that her plans will not alter if her health deteriorates. She can't predict that. If she gets dementia or something like Parkinson's disease she will need 24 hour residential care.

http://www.payingforcare.org/care-home-fees

Mojisola

Cakeguts wrote: »

How do your propose that she makes the mortgage repayments if the flat is vacant and there is no rent coming in or even that she gets a tenant who stops paying the rent and it takes her a minimum of 6 months to evict them through the courts?

If you are going into Buy to let you have to do research on Buy to let.

And also take into account the emotional impact of having bad tenants trash a flat that was the family home for many years.

If you're both planning on going into business as landlords, do it with homes that you have no attachment to.