Buying house for CASH from Son-Letting it out to His ex-Subsidized rent.

blindman

Hi
Son split from Ex who is living in their home with the 2 kids
He wants to sell the house to get money to carry on with life, 
She can't afford to sell, then move out, lose school places etc. Can't afford to rent at market value. Job uncertain after October.

House is 4 miles from e if that's relevant.
I own my own home which is mortgage free.
So my plan is to:
BUY in CASH their home.
Give son his share.
Allow his Ex + kids to live there.
They pay me rent (reduced for Friends and Family ) )

Income from the rent would build up our savings again.
We have pensions to cover daily life so if no rental income for whatever reason this would not impact us (No foreign holidays (!)

Pitfalls?
Cheers

[Deleted User]

blindman said:

Hi
Son split from Ex who is living in their home with the 2 kids
He wants to sell the house to get money to carry on with life, 
She can't afford to sell, then move out, lose school places etc. Can't afford to rent at market value. Job uncertain after October.

House is 4 miles from e if that's relevant.
I own my own home which is mortgage free.
So my plan is to:
BUY in CASH their home.
Give son his share.
Allow his Ex + kids to live there.
They pay me rent (reduced for Friends and Family ) )

Income from the rent would build up our savings again.
We have pensions to cover daily life so if no rental income for whatever reason this would not impact us (No foreign holidays (!)

Pitfalls?
Cheers

Is the property jointly owned by them as you refer to it as "their home"?  If so why is your only your son going to be given cash and why would the ex a) agree to this and b) pay you rent?

You'll need to pay the higher rate of SDLT when you purchase the property.

Comms69

blindman said:

Hi
Son split from Ex who is living in their home with the 2 kids
He wants to sell the house to get money to carry on with life, 
She can't afford to sell, then move out, lose school places etc. Can't afford to rent at market value. Job uncertain after October.

House is 4 miles from e if that's relevant.
I own my own home which is mortgage free.
So my plan is to:
BUY in CASH their home.
Give son his share.
Allow his Ex + kids to live there.
They pay me rent (reduced for Friends and Family ) )

Income from the rent would build up our savings again.
We have pensions to cover daily life so if no rental income for whatever reason this would not impact us (No foreign holidays (!)

Pitfalls?
Cheers

Are you buying only his share? 

Does she have an income?

macman

You will have to comply with all the legal and statutory requirements of being an LL, and declare the income from rental.
As above, 3% extra SDLT for a 2nd property. And it will be subject to CGT upon eventual sale.
In most cases, renting to F and F is a bad idea. People assume that it's not necessary to formalise things 'because it's family'. Then, when it inevitably goes pear-shaped, it costs a lot of time and money to resolve things, because there was nothing in writing.
If you charge less than a commercial rent, it can be seen as deprivation of assets should you go into care.

blindman

Things would be formalised.
Thanks for the bit about deprivation of assets.
Hopefully a long way off that scenario.

Sorry what is SDLT?

Know about CGT

Cheers

blindman

Both parties would get their share of the sale to me.

greatcrested

What will you do if/when the ex goes into rent arrears? Just asking. Renting to family, friends etc can be problematic.

So you pay market rate for the house (plus the extra 3% SDLT for a 2nd property). The cash is split, what? 50% to son and 50% to ex?

Read also

Post 7: New landlords (1):advice & information :see links in next post

Post 8: New landlords (2): Essential links for further information

Have you done a proper business budget for this investment?

* market rent = ? (what if she moves and you get a void - so calculate 10 months rent per annum).

* overheads (lots of them - investigate)

* tax

Compare the net income against what you'd get via savings or investments elsewhere. This may be a good pension inestment.It may not.

Comms69

blindman said:

Things would be formalised.
Thanks for the bit about deprivation of assets.
Hopefully a long way off that scenario.

Sorry what is SDLT?

Know about CGT

Cheers

You're kind of missing a crucial bit there, does she have an income? Because this screams contrived tenancy; and she'd be foolish to have a large amount of cash if she's reliant on benefits.

[Deleted User]

blindman said:

Things would be formalised.
Thanks for the bit about deprivation of assets.
Hopefully a long way off that scenario.

Sorry what is SDLT?

Know about CGT

Cheers

Stamp Duty Land Tax.

If you're buying the property from both of them and then letting the property to the ex this could be in the realm of sale-and-rent-back which is regulated by the FCA.

Comms69

Lover_of_Lycra said:

blindman said:

Things would be formalised.
Thanks for the bit about deprivation of assets.
Hopefully a long way off that scenario.

Sorry what is SDLT?

Know about CGT

Cheers

Stamp Duty Land Tax.

If you're buying the property from both of them and then letting the property to the ex this could be in the realm of sale-and-rent-back which is regulated by the FCA.

As well as issues with the type of tenancy created 

gwynlas

Would you be happy if his ex met somebody further down the line and wanted to move them in?