Share of House From Inheritance

bloke91

Hi

Looking for some advice please.

Myself and 3 brothers have inherited equal shares in my dad’s property.  I already have a mortgaged main property, so this inherited property would become a 2nd property.

It’s worth about 130k in terms of probate and requires about 20k of work doing to it to bring it up to scratch for renting.  A professional valuation indicated it could attract a rental income of about £525 a month once the work is complete.

Brother 3 and 4 would like to sell their shares.

1.       Do I consider buying brother 3 and 4’s share now or split it equally with brother 2. 

a)      Buy brother 3 and 4’s share now leaving me owning 75% and brother 2 owning 25%?

b)      Myself and brother 2 buy out brother 3 and 4 shares resulting in owning 50% equal shares between us?

Not sure what best approach is for keeping the property in longer term and capital gains\tax implications etc?

2.       I am a higher rate tax payer, so presume I pay %40 tax on the rental income?

3.       When and if I come to sell my share will I pay capital gains tax on the difference in value between probate valuation when I certified to that point in time? at the time of selling? 

4.       If I brought my remaining brothers shares out in a few years, presume I pay capital gains tax on the larger share I would then own if and when I went on to sell it??? Not sure if I would sell eventually or keep it and pass it down to children.

Robin9

Let the executors sell and distribute the proceeds of the estate as per the will. Tax doesn't come into it at all.

Keep_pedalling

Unless you have had previous experience of being a landlord I would think very carefully about taking this on. In reality you won’t be making anything like £525 a month. Apart from tax you have to take into account maintenance, void periods and non pay tenants who take months to evict.

Brynsam

If you don't already own a property, bear in mind that your plan will mean you pay second home stamp duty when you do come to buy. You would also be excluded from any first time buyer incentives. Yes, there will be capital gains tax to pay on any sale proceeds once the property becomes yours (whatever % share you own) unless it is your principal residence.

Rather more importantly, before going further with any sort of 'continue to own/rent out' plan, think hard about how you and Brother 2 will deal with the property on a day to day basis. Who will be responsible for ensuring it is checked to ensure it is being kept in good repair? How will you agree major expenditure such as a new boiler, roof or whatever (the initial £20K won't be the only large bill in the foreseeable future)? What happens if one of you wants to sell and the other doesn't/can't afford to buy the other out? What happens if one of you dies? 

None of the above is at all insurmountable, but thinking about it and getting it clarified at the outset saves a lot of grief later on.

Mojisola

Apart from the other good reasons given in previous posts for just selling it now and sharing the cash, it can be very hard to rent out a house that you have an emotional connection with.

If you really want to be a LL, do your research and look for a place to buy.

getmore4less

If you were going to become a landlord would you buy this house. 

JGB1955

Is it worth it for (maybe) £100 per month net income?

AnotherJoe

Another vote to just get it sold. And then if you really wish to become a LL (why, esp as a HR taxpayer ???) do it with something thats more easily maintainable like a flat, not an old house. But on the figures you give, really cant see how its worthwhile or why you are even considering it. Put the money in investments /  your pension, all low maintenance / hassle ways of benefiting.

xylophone

If you don't already own a property, bear in mind that your plan will mean you pay second home stamp duty when you do come to buy.  
I already have a mortgaged main property, so this inherited property would become a 2nd property.

OP said in the first post

I already have a mortgaged main property, so this inherited property would become a 2nd property.

If he goes ahead and buys out  two of his brothers and then sells in the future, he will need to consider the CGT aspect.

But as others have pointed out, he needs to think very carefully about whether he really wants to become a landlord, particularly a landlord with shared responsibility with the fourth sibling.