Co-buying a long-term let

Fitzkepp

Hi there, wanted to try and gain the benefit of your collective wisdom on something.

My parents have rented their property for a long, long time paying a very low rent (Parish property) and thus never got a mortgage or bought a property outright. My father is approaching the point at which he can gain a lump-sum payout from one of his pensions and they're looking for opportunities to get some kind of benefit from that money by investing it one way or another.

This coincides with my own thoughts moving further forward on how to provision my own retirement, given my pension is a significantly inferior one to the final salary jobby my dad has - and I'd concluded that some kind of property investment would be the best bet for me to.

Having thought on this, my original plan had been to essentially buy my parents home, them continue to pay the same they always have in "rent" but toward the mortgage, with me having provided the deposit and topping up the remainder of the monthly payments for the mortgage. It would be a decent investment for me as they'd be paying off at least half the mortgage and thus my investment would out-strip the interest rate on the deal.

This is all predicated on the notion we could actually purchase the house, which I'd much prefer given it's been their home for 30+ years.

The questions I'm leaning toward are;

1) Is there a "best" way to enter into a collaborative purchase like this, in terms of four or three applicants with two being resident?

2) Is there a cleaner way of doing it, i.e they buy it and I give them the deposit and "top-ups" themselves?

I think right now we're in a position where in 18 months time we'll each have a decent chunk of investable money, and a more than healthy monthly income to pay our "halves" of the mortgage.

Any advice/thoughts more than welcome!

Dox

Before you go any further, would it be sensible to find out if the property is available for purchase and if so, at what price?

There are major potential tax implications in what you have in mind, so proper legal and tax advice at a very early stage of the planning is essential. 'Collective wisdom' may be free but it's of no real value where detailed personal advice is required, which is certainly the case here.

You don't say if you currently own a property. If you do, remember you would be liable for an extra 3% 'second home' stamp duty on your share of any purchase.

What happens if your parents are still alive and living there in 30 or 40 years, when you might reasonably be hoping to either sell the place, or rent out at market rates? The older they get, the harder it will be to take any decisions which would impact adversely on them.

Brynsam

Where do you live, do you own a property, how old are you/your parents, which tax brackets are you in, what state of health, any siblings, your own immediate family other than parents (if any), your planned retirement age, any other savings, likely value of your parents' estate/your own estate, whether you need to do any IHT planning...

Much better to pay for professional help - and much quicker - rather than expect sensible answers based on next to no relevant information.

atush

Basically, if you want good opinions, give us good facts by answering the above questions.

A loan to your parents with them paying the mtg if any could be the best bet. Replayable should they sell, or deducted from the value on their death.


Other options could have bad tax implications

MEM62

Fitzkepp wrote: »

This coincides with my own thoughts moving further forward on how to provision my own retirement, given my pension is a significantly inferior one to the final salary jobby my dad has - and I'd concluded that some kind of property investment would be the best bet for me to.

Really? How so?

If you invest in property you are making it with post-tax money. Anything you put into a pension will be pre-tax - particularly important if you are a 40% tax payer.

You will also have all the costs and responsibilities of being a landlord. You may also have a tax liability for anything that you receive that is deemed rental income. Have you factored all this in?

BTL's are not the gold-plated money makers that many believe that they are and most under-estimate the commitment and over-estimate the return. Yes, there may be a place for one in a diverse portfolio but not as a stand-alone pension provision.

Fitzkepp

Brynsam wrote: »

Where do you live, do you own a property, how old are you/your parents, which tax brackets are you in, what state of health, any siblings, your own immediate family other than parents (if any), your planned retirement age, any other savings, likely value of your parents' estate/your own estate, whether you need to do any IHT planning...

Much better to pay for professional help - and much quicker - rather than expect sensible answers based on next to no relevant information.

Ok, so in order;

Nottingham
Yes (mortgaged)
34 / late 50's
Higher (me) / basic (them)
Well
No siblings
My wife + child, no other immediate family that side
National age (67 I think for me)
Insignificant savings
280k mine, 200k theirs
No likely not on iht planning

Thanks for replies, took me some time to get back to this due to focus in other areas. As I'm sure you can tell, this is a very early query and the advice to seek professional guidance is definitely strong. I'm as concerned about my parents investment working for them as anything, as my prospects at this time are pretty strong in terms of earnings. Thanks all

kidmugsy

Repeat every evening: I must do nothing that could leave my parents homeless or poor.