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

letsbetfair

It is also worth remembering that renting out the property could be a significant amount of work (it's effectively running a small business). Would you/your wife want to continue doing this for the rest of your lives, if it came to that? Hopefully you won't need care for many years, but it's possible that a council will insist you sell a house you're renting out if you're asking them to pay for care costs.

blindman

letsbetfair said:

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?

ties you and your wife in to your son's ex for the rest of your lives
How so? She will be my tenant

but I'd just give them money

So how does that get her into a rental situation she can afford ?

blindman

Densol said:

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. 

1. Of course.
2. Yes
3. Up to a point...
4. Certainly 

blindman

wilfred30 said:

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 ...................

It has been mentioned so I am now aware, thanks

blindman

greatcrested said:

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!

I've read the sale and rent back- Just see that I have to guarantee 5 years tenancy-BUT surely she can decide to move out any time?
CGT has been mentioned
They need help to both move on and I hopefully can help.

Not sure how I could invest in whatever and still help them? 

blindman

lr1277 said:

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.

Forever.
Why does it matter my tenant never moves out?

We re in good health, 
I have a daughter who is singed minded and an accountant.

The Will and POA are in the making.

letsbetfair

blindman said:

letsbetfair said:

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?

ties you and your wife in to your son's ex for the rest of your lives
How so? She will be my tenant

but I'd just give them money

So how does that get her into a rental situation she can afford ?

She'll be your tenant and could stay indefinitely - sounds like you wouldn't want to evict. That could be a lifelong connection, and not just a standard commercial one - you'd be subsidising the rent, and of course they're family.
If you give her money, she can use that to help buy a place, or subsidise her monthly rent for x years. She'll have more flexibility to choose what's best for her and kids rather than being tied to one house. How much she can do with the money depends how much you give her! Bear in mind that a long term subsidised rent would also be equivalent to giving her a significant amount of money, just over a longer time (and with additional tax and admin requirements).

MovingForwards

Why not just do a private mortgage with the ex-gf for the outstanding mortgage balance and 50% of the equity due to your son.
You still get an income each month because of the mortgage payment.
A solicitor draws the terms of the mortgage up and it's secured on the property like a normal mortgage is.

blindman

MovingForwards said:

Why not just do a private mortgage with the ex-gf for the outstanding mortgage balance and 50% of the equity due to your son.
You still get an income each month because of the mortgage payment.
A solicitor draws the terms of the mortgage up and it's secured on the property like a normal mortgage is.

Intersting
Would any solicitor do this?

AnotherJoe

wilfred30 said:

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 ...................

Ridiculous statement.  

The OP is buying a house not giving money or assets away.