Purchasing flat but current owners want to stay for 6 months after purchase

Emmia

kimwp said:

Why aren't you just keeping your bungalow and your son continues living there while you are travelling?

I wondered this, unless the sale would also release money to fund the travels.

bobster2

macawac1 said:

Anyway, that is briefly the background. So with this in mind I have been looking for a property that we can buy outright before we sell our bungalow. This will be a much smaller property that my son can live in while we travel, and will also serve as a temporary base when we return for family visits etc (as well as being a UK address for us while abroad). 

If this will be your only address in the UK - and you're going to be spending time there - even if it is registered in your son's name this will look a lot like a "gift with reservation". So may not drop out of your estate after 7 years.

kimwp

macawac1 said:

Albermarle said:

Another consideration of course for gifting my son the money for the flat is that if we manage to live for another 7 years it will not be subject to inheritance tax. I also believe it would be safe if we needed to go into a care home and have our assets used to pay for our care, again keeping my son's future home secure for him.

You are correct about the 7 years and IHT, but the rules about Deprivation of assets to avoid care home fees are not the same. The local authority will have their own views.
Also without your own funds you are at the mercy of the local authority about where they place you etc.

It is being advertised as a buy to let property as the current owners wish to remain in the flat for 6 months after the sale. 

Could be a big mess, I would look for somewhere else with less potential complications.
The owners would become official tenants ( you will need contracts, understand all the rules about being a landlord etc ) and after 6 months could decide they don't want to move anymore.

Thank you Albermarle. The more I hear and the more I look into it I believe that this is not the solution for us. 

Finding another property sounds like a much more sensible idea. I am still undecided however on whether we buy the second property and take the hit on stamp duty, CGT, IHT etc. or whether to gift the purchase price so that my son can buy in his name. I will have to eat my hat if this ends up as a family fall out, and take the hit on that. I cannot protect my son from future relationship breakdowns, but would be grateful if anyone could offer advice on whether we could protect from him losing 50% of his property if this ever did happen. 

If you won't need the money, then the earlier you give it to your son, the better (re inheritance tax, but also a smaller cash injection earlier has a much greater impact on someone's life than larger cash injection later)

In terms of protecting your son from losing 50%, does he have difficulties understanding this sort of thing?

BungalowBel

We did similar when we moved to Spain for eight years, except we kept our family home and our son lived in it with a couple of lodgers to help him pay the bills.It meant that, like yourselves, we had a bolthole when we returned to the UK.

Yes, the garden  went to pot, but that was easily remedied once we returned full time.  

When we returned full time, the lodgers were evicted and we gave our son enough for a deposit on a flat from  the sale of our Spanish house 

Maybe this is a scenario you may wish to consider?   It seems that you have the money to do this without selling your home.

FlorayG

OMG no. That is fraught with so many difficulties and if you're not even going to be in the country you will really struggle to keep control. The vendors may be genuine and don't themselves realise the complications. I can't see how selling and then renting it back helps their situation anyway

Tabieth

That’s a hard no. It’s a terrible idea. 

saajan_12

macawac1 said:

Anyway, that is briefly the background. So with this in mind I have been looking for a property that we can buy outright before we sell our bungalow. This will be a much smaller property that my son can live in while we travel, and will also serve as a temporary base when we return for family visits etc (as well as being a UK address for us while abroad). 

Another aspect is from the tax angle. If we were to purchase the flat we would pay the higher rate stamp duty, and the flat would also be subject to capital gains if we ever sold it. 

What's the benefit to you in buying before you sell? You don't need two properties at the same time, and could sell / buy in a chain the normal way. That takes out the extra SDLT, CGT, and the interest cost of owning two properties at the same time. 

If you're just thinking about it for this property because the seller wants to live there for 6 months, then it would have to be significantly discounted to even consider. 

Silvertabby

prowla said:

I suppose the risk is if the previous owners decide they want to stay longer.

Perhaps because their circumstances change, and they can't get another mortgage full stop.

newsgroupmonkey_

If you're buying a BTL property with a sitting tenant, this should be significantly cheaper - I'd be looking at 30% below market value.

Have the sellers considered this?

Yorkie1

newsgroupmonkey_ said:

If you're buying a BTL property with a sitting tenant, this should be significantly cheaper - I'd be looking at 30% below market value.

Have the sellers considered this?

But the proposal is not to sell with an existing tenant. It's a sale where the property owner is becoming a tenant, which is highly regulated and - I suspect - is not a regular BTL mortgage etc.