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

blindman

Noted.
Thanks for the reply

[Deleted User]

I agree with you OP
The trouble is you are asking on a money saving site and people here sometimes lose sight of family and friends and the importance of grand kids. 

Life is not all about making money. 
you are going to buy the house off them both. 

Give each their equity less any mortgage they had outstanding.
you are prepared to pay the 3% stamp duty as that is all it is.
you dont need a mortgage - so no worries there 
she pays you a reduced rent
kids stay in their home
remain in their schools 
As long as 1. Wife declares rent to HMRC ( she is non earner so has full personal allowance  so no tax on likely rent ) 
2. You comply with gas certs and other obligations 
3. You could stomach ex deciding not to pay rent
4. her meeting someone new 

I really cannot see a problem with it. Its a generous offer and as they were not married ( and dont have divorce finances to worry about ) its relatively easy. 

letsbetfair

It's a generous offer, but it's also one which ties you and your wife in to your son's ex for the rest of your lives. Even if things stay amicable, the ex might be unable to pay rent for some while. And it's uncommon for people to maintain a wholly drama-free relationship with their ex for decades.
Even if all goes well, you're making a knowingly poor value investment - effectively subsidising you son and his family. If you can afford to give your son and/or his ex money and want ot do so, that's great - but I'd just give them money (and then invest the rest for better value). That way you know what you're giving, and they can use your gift as they see best.
One more thing to think about if you do buy the house for the ex - it's quite possible you'll end up with a long period of no rent coming in and the house costing you money (e.g. boiler breaks at the worst moment!) Would that be ok?

greatcrested

Re:the question of tenancy type, I have no more knowledge than other experienced landlords here. I'm not a property lawyer - my knowledge and experience is pretty exclusively with ASTs in England/Wales.

Having said that, someone earlier mentioned 'sale and rent-back', and I believe that would apply here.

A quick google (citizen's advice here) shows these schemes are Regulated, and apply both to companies and individuals who offer them. Compliance is needed with the Regs, so you need to research in detail.

To start with, I note the minimum tenancy length is 5 years, which immediately requires the contract to be Executed as a Deed amongst other things.

On another matter, no one (I think!) has menioned Capital Gains Tax so that's a consideration.

As for the investment return, yes, you are right that leaving the cash in a bank will currently get you barely 1% (possibly taxed depending on circumstances), but other investments are available - particularly pension investments which would be very tax advantageous (depending again on your circumstances/age etc). But these are financial considerations, not relationship ones!

getmore4less

getmore4less said:

How big is the mortgage on this £180k house?

blindman said:

getmore4less said:

How big is the mortgage on this £180k house?

£114 K

£66k  equity.

Could just gift/loan him his £33k to move on with his life 

Rent on a £180k place should be at least £600pm 4% gross yield

Mortgage payment on £114k  over 25 years should be around £500pm  (interest/rent on the money is <£200pm)
how much were you planning to subsidise the rent  effectively gifting the ex money?

tacticalbanjo

Regardless of the profit side I think blindman and his son should be applauded for making sure that the kids are being taken care of. There are a lot of feckless fathers out there and minimum maintenance doesn't come near the actual costs of raising a family. No doubt being so generous now with the ex will mean blindman can continue to have a great relationship with the grandkids - and that's quite possibly worth the expense of housing the ex to him.

Comms69

tacticalbanjo said:

Regardless of the profit side I think blindman and his son should be applauded for making sure that the kids are being taken care of. There are a lot of feckless fathers out there and minimum maintenance doesn't come near the actual costs of raising a family. No doubt being so generous now with the ex will mean blindman can continue to have a great relationship with the grandkids - and that's quite possibly worth the expense of housing the ex to him.

Nor is that the intention?....

lr1277

Ok let’s say this happens.
How long are you going to own the property? What happens if the ex doesn’t move out when your youngest grandchild reaches 18? Is it possible the ex will have more children and she doesn’t want to move until all her children are 18? Is it possible she stays there till she dies in old age?
I guess you and your wife are currently in good health. What happens if you or your wife get mobility or cognitive issues? Will your son or daughter act as your managing agent of the property (including submitting your taxes) if you can no longer manage the property? Will they act as landlord in your place?
In this case I urge you (if you haven’t done so already) to draw up a will and a POA for financial/property affairs.

wilfred30

Another thing that may come back to bite you on the backside in the future is Deprivation of Assets.  I'm sure you'll say that you and your wife are nowhere near the stage of having to consider the possibility of having to pay care costs but nobody knows what the future holds.  Just sayin ...................

lr1277

Remember if the property is going to be sold, or a new tenancy started, the owner needs an Energy Performance Certificate. However I believe these are valid for a few years.
I have said what I said because my parents are landlords to a single older man. He doesn’t want to buy as he has no children to whom he can pass on the property. He wants to die in the property.
My dad can no longer manage the property so I am doing 95% of the work, including submitting taxes. It is not a job I relish.
Then say your son or daughter are managing the property, and for whatever reason have to move hundreds of miles away making it more difficult for them to be a landlord. 

I know properties can be sold with tenant in-situ....
Just some thoughts.