What to do with my parents property.

MobileSaver

beancounter111 said:

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?

Yes, CGT will be payable on the increase in what they paid for it and what it's worth today. Your sister will lose her First Time Buyer status which may or may not be an issue. 

Do your brother and sister want to start a property business? Who will do the work involved in running the business? Where will the money come from for maintenance, repairs and other expenses if the rent is going straight to your parents while they're alive?

If your parents pass within 7 years then IHT could be an issue. If your parents know they will need care in the future then deprivation of assets will be an issue.

What happens in 2, 5 or 10 years if one or more of you would rather sell and get a £50,000 lump sum instead of a paltry £166 a month share of the rental?

The biggest issue I think is that your parents will be essentially giving you three siblings an early inheritance BUT that inheritance is relying on all three of you forever being in agreement on what you can and cannot do with it. It could work out great and all three of you live happily ever after or it could become a nightmare that tears the family apart.

Lots for you to think about...

eidand

I fail to see how you paying them £500 / month makes sure they don't miss out.
You forgot a crucial detail in this and that's the price of the asset itself. 

Have a discussion by all means and see what they think.

Slithery

beancounter111 said:
I wouldn’t want my parents to go without the money so I would ensure they keep receiving the rental money.

What about the £150k asset you want them to give you. How would you be compensating them for that?

getmore4less

MobileSaver said:

beancounter111 said:

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?

Yes, CGT will be payable on the increase in what they paid for it and what it's worth today. Your sister will lose her First Time Buyer status which may or may not be an issue. 

Do your brother and sister want to start a property business? Who will do the work involved in running the business? Where will the money come from for maintenance, repairs and other expenses if the rent is going straight to your parents while they're alive?

If your parents pass within 7 years then IHT could be an issue. If your parents know they will need care in the future then deprivation of assets will be an issue.

What happens in 2, 5 or 10 years if one or more of you would rather sell and get a £50,000 lump sum instead of a paltry £166 a month share of the rental?

The biggest issue I think is that your parents will be essentially giving you three siblings an early inheritance BUT that inheritance is relying on all three of you forever being in agreement on what you can and cannot do with it. It could work out great and all three of you live happily ever after or it could become a nightmare that tears the family apart.

Lots for you to think about...

if parents get £500pm in return for the gift it never falls out of their estate its a gift with reservation.

£500pm rent on a £150k property  4% gross yield is not a great investment if you are giving away the £500pm  making it 0% then you have costs to cover.

some basic starting a business number crunching needed.

Ath_Wat

beancounter111 said:

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. 

 

They have a property worth (say) £150K and an income of £500 a month.

You want them to give you the 150K asset outright and tell them you will keep giving them the existing £500 a month.

As the basic tenet of this plan requires someone to give you £150K, there isn't much point worrying about the ins and outs of it unless you have established they are willing to do so.  There's nothing in it for them, you just need them to commit to an act of generosity.  Which to be honest a lot of people, myself included, would be extremely unwilling to do, even to my children, if they came to me trying to present it as some kind of business opportunity rather than a request for a  rather sizeable gift. 

elsien

beancounter111 said:

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. 

Perhaps not but they’re still sitting on an appreciating asset. Gifting the house would lose them any increase in value that they would otherwise have. 

Ath_Wat

elsien said:

beancounter111 said:

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. 

Perhaps not but they’re still sitting on an appreciating asset. Gifting the house would lose them any increase in value that they would otherwise have. 

As well as the current value of the asset.  The fact that they don't currently plan to sell it doesn't mean that taking that option away from them doesn't count for anything.

steampowered

If you want to get into the BTL business, why don't you buy a property yourself? 

What benefit is there to buying the property from your parents, rather than buying any other property?

I mean if your parents were looking to sell the property then this is fine, but if they were not looking to sell I do not understand what you want to achieve. Unless you are hoping that your parents will sell you the property for less than market value.  

Ath_Wat

steampowered said:

If you want to get into the BTL business, why don't you buy a property yourself? 

What benefit is there to buying the property from your parents, rather than buying any other property?

I mean if your parents were looking to sell the property then this is fine, but if they were not looking to sell I do not understand what you want to achieve. Unless you are hoping that your parents will sell you the property for less than market value.  

He hopes they will give it to him free as long as he pays the £500 a month rental.

I think he's missing the idea that the house is not just "a thing that brings in £500 a month" but is "a thing that can bring in £500 a month until such time as it is sold for £150,000" and feels his parents won't lose out if he gets the £150,000 to buy other houses with  and they just continue to get the £500 a month.

Ath_Wat

getmore4less said:

if parents get £500pm in return for the gift it never falls out of their estate its a gift with reservation.

£500pm rent on a £150k property  4% gross yield is not a great investment if you are giving away the £500pm  making it 0% then you have costs to cover.

some basic starting a business number crunching needed.

His plan does work, theoretically.  I think it's basically this:

The parents give him the house.  He raises £125,000 mortgage on that house and uses this cash to buy another house (or as a deposit on several btl mortgage purchases).

The rent from the first house still goes to his parents so he makes nothing from that.

The rent from the second or subsequent houses is his.

In theory (practice is very different with voids and expenses etc), it does work, but he doesn't seem to realise that it's just like asking his parents for £150,000 in cash.