Are we forced to sell mum's bungalow after her death or can we rent it out?

SpideressUK

Mum has made a Will for 50/50 division of her estate between myself and my brother.  The bungalow could sell for about £100K and she will have less than £20K in cash.  Do we have to sell her bungalow upon her death and share the cash between us or can we rent it out and sell it in years to come? (we are thinking that with the uncertainty of the economy at present and for the foreseeable future if the bungalow were to be sold now it might have to sell for less than it is actually worth).

Browntoa

There is no requirement to sell , purely divide it 50/50 . This can be achieved via the land registry. 

It might be worth getting something in writing agreed between the pair of you about what happens if one half wants to sell. Could avoid argument down the line

pphillips

You also need to think about liability for capital gains tax on the increase between her death and the sale. So are or could either of you become liable for the higher rate of capital gains tax in the future and does either of you lose your first time buyer relief by holding on to the property?

xylophone

You can choose to own the inherited property as tenants-in-common or as joint tenants and can choose to let out your property.

However, you would become joint landlords with all the responsibilities that entails.

From other posts  on the boards, it is not rare for  siblings to end up in disagreement or for joint owners of a property to end up  disagreeing about rent/choice of tenants/  maintenance and repair/time to sell etc.

Discuss all the above before embarking on the rental scheme and sort out a Declaration of Trust.

SpideressUK

xylophone said:

You can choose to own the inherited property as tenants-in-common or as joint tenants and can choose to let out your property.

However, you would become joint landlords with all the responsibilities that entails.

From other posts  on the boards, it is not rare for  siblings to end up in disagreement or for joint owners of a property to end up  disagreeing about rent/choice of tenants/  maintenance and repair/time to sell etc.

Discuss all the above before embarking on the rental scheme and sort out a Declaration of Trust.

Thanks, we were thinking of using an estate agent who do all that side of things and take a cut from the rent etc but it does still leave the issue of property maintainance and an appropriate time to sell the property etc.  Definately a lot to think about and weigh up the options.

JReacher1

It doesn’t sound like your mother is dead. Is it not a bit too early to be planning what to do with her bungalow?

Brynsam

SpideressUK said:

(we are thinking that with the uncertainty of the economy at present and for the foreseeable future if the bungalow were to be sold now it might have to sell for less than it is actually worth).

The bungalow is 'worth' whatever someone is willing to pay for it. There is no guarantee that house prices will rise in the short or even the medium term.

Think hard before saddling yourselves with the responsibility of being landlords - and consider the tax implications.

Do you and your brother already own your own properties? If not, be aware that part ownership of the bungalow will mean if you do want to buy, you'll be hit for second home stamp duty and can't take advantage of any first time buyer schemes.

Stubod

We did this when our parents passed away as we didn't need the cash from the house sale and preferred the idea of a bit of ongoing income. We initially rented out via an agent that charged 10% for a fully managed service, I then took the relevant courses (online) and went self managed.

We are lucky that we have a good tenant that takes care of the property and pays the rent on time. You need to consider how you would react if you had a bad tenant as you could end up with no income and costs to evict which could take months.

As I live nearest I look after everything (which is fine as it was my suggestion in the first place). We split the rent 40/40 and leave the balance of 20% in a joint bank account towards maintenance and insurance costs.

You need to consider the house value and the interest it would generate (not a lot at the moment!) compared to the rental value (less costs and any tax).

Our hope was that the house value would continue to increase while generating a monthly return, however in the last few years I doubt if the house value has actually increased at all, but with current interest rates I am not too bothered and don't regret going going for this option.

unholyangel

JReacher1 said:

It doesn’t sound like your mother is dead. Is it not a bit too early to be planning what to do with her bungalow?

This. 

You talk of renting due to the "uncertainty of the economy at present" and "if the bungalow were to be sold now" but then also talk of your mum in the present tense and her death in the future tense. 

Unless your mother is terminal then you are getting far too ahead of yourself. Your mother could require care or run up debts that mean the house has to be sold/there's nothing left for you two to inherit. The house might require extensive work done before it can be rented that neither you nor your brother can afford. 

Wait and see what way the chips fall before you try cashing them in. 

Mickey666

JReacher1 said:

It doesn’t sound like your mother is dead. Is it not a bit too early to be planning what to do with her bungalow?

Strange advice.  Isn't good financial management all about planning?  No one would sensibly suggest waiting until retirement before thinking about pensions, so why should this circumstance be any different?

Surely it's far better investigate options well ahead of time without all the pressure of a death in the family, funeral arrangements and probate issues etc.  As rightly pointed out above, there are many issues to thoroughly consider in the OPs scenario so the more time to fully investigate and understand them the better.

unholyangel

Mickey666 said:

JReacher1 said:

It doesn’t sound like your mother is dead. Is it not a bit too early to be planning what to do with her bungalow?

Strange advice.  Isn't good financial management all about planning?  No one would sensibly suggest waiting until retirement before thinking about pensions, so why should this circumstance be any different?

Surely it's far better investigate options well ahead of time without all the pressure of a death in the family, funeral arrangements and probate issues etc.  As rightly pointed out above, there are many issues to thoroughly consider in the OPs scenario so the more time to fully investigate and understand them the better.

Arguably, good financial management is managing what you have yourself, now. Not in the future.  Even the pension example you mention....you're managing what you have now (putting away some of your current income) for the future. 

Or should I start financially planning for my lottery win now?