What to do with my parents property.

Annisele

Ath_Wat said:

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.

From a tax perspective, it's (probably) quite a bit worse than just asking for £150k in cash. A strings free cash gift would be just that - a gift - and not a gift with reservation. So assuming inheritance tax is an issue at all, the IHT position would be worse with the house gift plan.

From a capital gains tax perspective, if the parents are willing to gift £150k then the house probably isn't their only asset (and if it is, asset deprivation might be a problem). The parents might have a much more tax efficient way to come up with £150k cash than selling/giving away their property.

getmore4less

Ath_Wat said:

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.

The theory needs to be accurate to to start with

If the parents get the £500pm but he carries all the costs and tax so makes a loss on the first property.
Even more if he plans to cover voids.

the GWR may cause future tax issued for the parents.

Not my area but as the £500pm it attached to the gift might fall under preowned asset tax regime. 

fewcloudy

These are the sort of threads where the next time you check in to see any replies, the original post has been deleted.

martindow

fewcloudy said:

These are the sort of threads where the next time you check in to see any replies, the original post has been deleted.

It has been quoted in full on the first page, but I know what you mean.

Ath_Wat

getmore4less said:

Ath_Wat said:

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.

The theory needs to be accurate to to start with

If the parents get the £500pm but he carries all the costs and tax so makes a loss on the first property.
Even more if he plans to cover voids.

the GWR may cause future tax issued for the parents.

Not my area but as the £500pm it attached to the gift might fall under preowned asset tax regime. 

Costs and taxes are expenses.  

Brie

£500 a month without any rent increases?  

What if one of the siblings loses their job, gets married, gets divorced, gets bored of being involved?  

Sudden catastrophic medical issue with one or both parents would have deprivation of assets happen much sooner than anyone would like and the local authority will certainly chase for the care costs.