What to do with my parents property.

beancounter111

My parents own another property in addition to their main property which they rent out for £500 per month. 

I have an idea that they could transfer the house to myself and my brother and sister so that we could use this to start a property business. 

My plan would be to still pay my parents the £500 so they don’t lose out, however me and my siblings would take a mortgage out on the property and use this to fund the purchase or another 1 or 2 properties. 

How feasible does this sound?

beancounter111

They own this property outright which I forgot to mention. 

El_Torro

Your parents can certainly give you the property if they want to. Deprivation of assets and inheritance tax (depending on when they die) could be a factor though. 

Legally I'm not sure there's much that could be done to force you to give your parents £500 a month indefinitely. It also opens up a lot of questions. For example if maintenance needs to be done on the property would you deduct it from the money you give them?

MaryNB

beancounter111 said:

My parents own another property in addition to their main property which they rent out for £500 per month. 

I have an idea that they could transfer the house to myself and my brother and sister so that we could use this to start a property business. 

My plan would be to still pay my parents the £500 so they don’t lose out, however me and my siblings would take a mortgage out on the property and use this to fund the purchase or another 1 or 2 properties. 

How feasible does this sound?

beancounter111 said:

My plan would be to still pay my parents the £500 so they don’t lose out, however me and my siblings would take a mortgage out on the property and use this to fund the purchase or another 1 or 2 properties. 

Can you still afford to pay £500 a month plus mortgage repayments if the tenants stop paying rent? 

Have you considered the capital gains your parents will owe? Will you be paying that?

pramsay13

They can give you the property or even remortgage themselves and give you the money, but we probably need a bit more information to have a better idea if it's a sound business proposition.
Do they want to give you the property? ("I have an idea... My plan..." suggest it hasn't been discussed yet. 
What's the property worth? (I'm guessing around £100k with rental of £500 per month).
Who would pay the mortgage on this property?
Who would pay for repairs and maintenance?
If you get £500 per month rental but are giving it to your parents, how will you pay income tax on this property?
Why haven't your parents bought another property using capital from this property?
Do you have your own property? What is the status?

beancounter111

pramsay13 said:

They can give you the property or even remortgage themselves and give you the money, but we probably need a bit more information to have a better idea if it's a sound business proposition.
Do they want to give you the property? ("I have an idea... My plan..." suggest it hasn't been discussed yet. 
What's the property worth? (I'm guessing around £100k with rental of £500 per month).
Who would pay the mortgage on this property?
Who would pay for repairs and maintenance?
If you get £500 per month rental but are giving it to your parents, how will you pay income tax on this property?
Why haven't your parents bought another property using capital from this property?
Do you have your own property? What is the status?

Thanks for the detailed reply. 

I haven’t brought it up with them yet as I wanted to see if the idea was feasible to begin with. I’ve spoken to my dad before about remortgaging it himself but as he’s retired he didn’t think he’d be able to get a mortgage. 

The property is worth circa £150k and I would be proposing that me and my 2 siblings would be fully responsible for the mortgage and any repairs. (It was only built around 10 years ago so I don’t believe the maintenance costs will be high) I wouldn’t want my parents to go without the money so I would ensure they keep receiving the rental money. 

I own my property (mortgaged) my brother owns a house (mortgaged) and my sister rents. 

To clarify I’m willing to risk losing £500 on one house if it means that we can get 3 houses almost immediately and keep refinancing every two years or so to build a portfolio for our kids and my sisters kids. 

beancounter111

MaryNB said:

beancounter111 said:

My parents own another property in addition to their main property which they rent out for £500 per month. 

I have an idea that they could transfer the house to myself and my brother and sister so that we could use this to start a property business. 

My plan would be to still pay my parents the £500 so they don’t lose out, however me and my siblings would take a mortgage out on the property and use this to fund the purchase or another 1 or 2 properties. 

How feasible does this sound?

beancounter111 said:

My plan would be to still pay my parents the £500 so they don’t lose out, however me and my siblings would take a mortgage out on the property and use this to fund the purchase or another 1 or 2 properties. 

Can you still afford to pay £500 a month plus mortgage repayments if the tenants stop paying rent? 

Have you considered the capital gains your parents will owe? Will you be paying that?

I could afford the payments on my own and as I’d be responsible along with my brother and sister affordability wouldn’t be a problem. 

What CGT will they have to pay? Is that the difference between what they bought it for and what they would sell it for?

elsien

Regardless of the £500 a month they’d still be losing out on any increase on equity in the property depending on what happens with property prices. How would you factor that in? 

beancounter111

elsien said:

Regardless of the £500 a month they’d still be losing out on any increase on equity in the property depending on what happens with property prices. How would you factor that in? 

They don’t have any plans for the property over and above getting the rent. 

Snookie12cat

If you do this then you lose any FTB discount for stamp duty, assuming you are, plus then have to pay the additional 3or4% on any future purchases. 
If you do not own your own home you can basically assume getting your own house will be that much harder owing to this additional tax.

beancounter111

Snookie12cat said:

If you do this then you lose any FTB discount for stamp duty, assuming you are, plus then have to pay the additional 3or4% on any future purchases. 
If you do not own your own home you can basically assume getting your own house will be that much harder owing to this additional tax.

My brother and I already own our own homes.