Buying my parents house UNDER market value.

bluejake

Ems! wrote: »

Are you joking?!!! The parents won't be making the mortgage payments... the op will as he will own the house. They will pay him rent. They are FAMILY!!! I am sure they will not go into it lightly and of course there needs to be trust but I would trust any of my family with something like this.... the op is not ripping their parents off!!!

I'm not joking. That is a great deal for the original poster only. If you pay 250k for a 350k property that is 100k you are trousering which is not small change. 100k that will not be available for the parents or other siblings. And what happens if he loses his job and can no longer afford the mortgage or he gets a divorce and his ex-wife wants half the asset or wants to charge a higher rent or wants to force a sale? What about the other siblings who are p1ssed about about their inheritance being snatched away by their brother?
Because they are related does not mean there will not be problems. I do believe parents should get independent advice and all interested parties should be consulted.

btloptingout

bluejake wrote: »

I'm not joking. ....that is 100k you are trousering

I think you've completely missed the following:

56cheffy wrote: »

They are wanting to have some cash themselves and divvy some out to the 3 children and grandchildren who can make more use of it now rather than in xxx amount of years.

Their (the parents) motivation is to give their children early access to an inheritence, which is completely tied up in property.

The OP takes on a considerable risk and tie up of his share (100K) in lieu of the others getting their smaller stake (50K) immediately without any conditions.

One of the considerable risks he needs to way up is buying a property at the peak and potentialy seeing his share completely and utterly written off in a downturn. His siblings are completely free of this risk and hence seem happy with the deal.

I think there's a lot of potential pitfalls in the proposal which needs to be worked through, as per my earlier post I think there are better alternatives.....but to attack the OP as selfish or "trousering" is completely barking.

Throughout the world cultures have different ways of handling family finance. Think doweries in India, think family run businesses (handed over early) in the Med......

Personaly I want my parents to die broke....by that I mean I want them to fully enjoy all fruits of their labour and leave nothing to me. I will do this by buying their house sometime in the future.....but I still need to remain cashflow neutral myself as part of the process as I have my own commitments.

56cheffy

bluejake wrote: »

I'm not joking. That is a great deal for the original poster only. If you pay 250k for a 350k property that is 100k you are trousering which is not small change. 100k that will not be available for the parents or other siblings. And what happens if he loses his job and can no longer afford the mortgage or he gets a divorce and his ex-wife wants half the asset or wants to charge a higher rent or wants to force a sale? What about the other siblings who are p1ssed about about their inheritance being snatched away by their brother?
Because they are related does not mean there will not be problems. I do believe parents should get independent advice and all interested parties should be consulted.

Bl00dy hell...seem to have opened a can of worms here!

It is my parents idea to try and release some money for the benefit of their children and grandchildren, which like I said is of more use to them now than in 10/15 years time..BTW, my dad is 76 and mum 81.....

We were asked if we/any of us were in a position to buy, either together or separately, my brother/sister are not...I 'might' be.

The house was valued LAST year at £350k, it will not be worth that now.
I told them that the most I could afford would be approx £250/275k....They are all happy with this. My father is not in the best of health and if he were to need to go in to care at a later date the money would soon be gone at £800+ pcm in a care home and they could possibly end up with very little or NOTHING.

I am taking all the risks by investing all my money, taking out a LARGE mortgage in a house that my parents will live in until they choose otherwise.....my money could be tied up for many years...I WILL NOT be asking them to move out...EVER...

I appreciate and so do my brother and sister that if it does go ahead I stand to make a VERY healthy profit, but I am taking all the risks and am allowing them NOW to get some much needed cash in their hands for themselves and their children, who are now at a time in life when they are considering university, buying there own property, getting married,etc.

I am not trying to RIP anyone off and take offence to anyone who suggests otherwise.:mad:

What I am trying to do is actually help my family out.

Thanks for all the constructive comments and advice..obviously not as straightforward as I had hoped....

clutton_2

dont give up just got you got a couple of negheads comments !!!

btloptingout

56cheffy wrote: »

Bl00dy hell...seem to have opened a can of worms here!

Don't worry, the majority understand the fine intentions behind your proposal.

One thing to note however is that it's going to be very difficult (impossible) to
a) Give early inheritences amounting to £150K, and
b) Give your parents some cash (100K), and
c) Let them stay in the house on a cashflow neutral basis, and
d) Keep risks/potential tensions away from the deal.

To MEW out £250K from a house means aquiring a debt of £250K which will cost approximately £1250 pcm to service until they die.

Biggles

56cheffy wrote: »

I appreciate and so do my brother and sister that if it does go ahead I stand to make a VERY healthy profit, but I am taking all the risks

With due respect, Cheffy, you don't take any risk buying a £350k property for £250k.

And I wasn't suggesting you were trying to rip anyone off. But your brother & sister, presently being unable to make an offer for the house, might feel obliged to acquiesce and could look differently on the deal a few years down the line.

But you are right in your first and last sentences: it's a can of worms and very far from straightforward.

To take the point about for father's health, for example. If he should need to go into care in the next few years, Social Services wouldn't be able to touch the house, as your mother would still be living there. But if he had £100,000 in the bank from you, that would have to go to pay for his care home fees. And, if he should have to go into care shortly after making gifts to his children, this might be deemed to be deliberate 'deprivation of assets' (where someone gives their money away so that they will receive council funding sooner) and can ask for fees to be met by the recipients.

Inheritance Tax and Capital Gains Tax are two other areas of very great difficulty. I would think that you need the advice of a professional if you are going to go down this route.

Generali

The price you're offering is probably around what one of these 'We buy your house and rent it back to you' firms would pay anyway so you'd have a good argument that you are paying market price for the market that you're in.

Taking proper professional advice rather than going on the word of some idiot posting on the internet at gone midnight is probably the best thing that's been posted here.

bluejake

I certainly think if I was one of the siblings offered 50k now I think would I would offer to take on the 'risk' of inheriting the 350k house (or whatever if may be worth in 5 or 10 years) and the rental income and let 56cheffy take the 50k instead.

I wonder how people will feel further down the line long after the 50k has gone and you are cashing in a fortune.

You are certainly opening a can of worms. Just to add to the previous poster any state benefits or Pension Credit they claim or may have been entitled to in the future may also be affected.

3plus1

56cheffy wrote: »

The house was valued LAST year at £350k, it will not be worth that now. I told them that the most I could afford would be approx £250/275k....They are all happy with this.

Have you tried looking at similar properties in the area, to get a rough idea of how much it might be worth? If £250,000 is seriously undervaluing the house, HMRC are likely to take an interest. If your parents sell you the house for less than market value, then the difference between how much you actually paid and how much you should have paid, then becomes treated as a gift.

56cheffy wrote: »

I am taking all the risks by investing all my money, taking out a LARGE mortgage in a house that my parents will live in until they choose otherwise.....my money could be tied up for many years...I WILL NOT be asking them to move out...EVER....

Keeping with the gift problem... if you want to let you parents live in the house rent free, then the gift becomes a gift with reservation of benefit, and the difference between what you should have paid for the house and what you actually paid for the house, then gets treated as if your parents never gave it to you. It becomes part of their death estate. If that's not covered by their nil rate band, then you're looking at a 40% death tax. Although you have to bear in mind that there are two parents there, and as such, two nil rate bands. Double the allowance.

If your parents' estate is actually worth quite a bit, you want to be solving the "reservation of benefit" problem, and the way to get round this, is to charge your parents a market rent. Could they actually afford this?

Your parents could look at ways of reducing the value of their estate... They could make gifts to their other children - if they survived their gifts by seven years, then the money wouldn't be considered part of their estate. Also, if any of their children or grandchildren are getting married - they can give away a one off chunk of money without the seven year rule applying.

This is all quite complex, and you have to also factor in the emotional side of things. Your parents might not resent you buying their house and making a £100,000 profit out of it (well, I say profit, but it's only a profit if you later sell it on and realise that cash) but your siblings may well.

And IHT planning can be quite sensitive - who wants to think about dying?

I think you all need to seek professional advice here. I would suggest that some sort of planning can be done to minimise IHT, but that a professional needs to be involved as it's more complicated than you imagine.

hopeless_case_2

BLuejake the parents want to sell the house to him everyone else is happy with it, what is your problem? they dont have one so why do you?