Buying parents house cheap

kaka

Hi I was after a bit of advice.
My mother has kindly offered to sell her house to us for £120k. Its current value is £148k. She basically wants us to get on the property ladder.

She wants us to pay the deposit on a mortgage and has told us once everything has been transfered, she will give us back our deposit and legal fees.

My mother has also said she would like to invest the money she gets from the sale of house into another property in joint names with me (son). So investing £100k into a £160k house, leaving me a mortgage of £60k. (Buy to let) So mother could gain a bit of an income.

Would it be better if she just invested the house money into a high interest rate account and is this whole idea a good one.

As you may have gathered my mum is more astute than I am. So any advice would be really welcome.

Generali

How old is your mum? If she's approaching retirement then BTL is a bit risky, if she's a good way away from retirement then the right deal could be a good idea (although finding the right deal is likely to be tough right now IMO as rents are low compared to house prices in historical terms and a lot of people, me included, think that house prices are likely to fall quite a bit in the near future).

Bear in mind that you should pay stamp duty on the value of the house not on the price paid.

Also there could be an impact on inheritance tax and there are laws about selling stuff below the market value in some circumstances (bankrupcy and some welfare benefits spring to mind).

It's very generous of your mum but I'd definitely pay for proper legal advice rather than listening to a bunch of anonymous slack jaws on the internet (no offence fellow MSEers but you know what I mean).

fc123

Generali wrote: »

It's very generous of your mum but I'd definitely pay for proper legal advice rather than listening to a bunch of anonymous slack jaws on the internet (no offence fellow MSEers but you know what I mean).

:eek: :eek: :eek:

Generali

Yeah, I did hesitate before putting that bit. Funnily enough I had SquatNow in mind as I was typing.

A_Nice_Englishman

Could you post the estimated cashflow figures for the proposed property rental business?

I don't know what other investments you and your mother have but putting £180K (?) of borrowed money into residential property seem quite high-risk, at least in the short term.

kaka

Thanks for the posts.
This morning i will be arranging an appointment with an accountant to discuss everything about buying my mums house. As for my mums age she is 67 and has other investments. hope this helps, i'll get the exact numbers later on today for the investment property.
thanks:beer:

Mac_Sami

At risk of being a slack jaw, hopefully this gives you a starting point - but please still consult a professional, as not only can they give you a definitive answer, they can also advise on the best way of approaching this scenario.

You are seen as a connected person, because your Mum is selling the property to you at under market value. For the purposes of Capital Gains Tax, your Mum will be deemed to have sold the property at its full market value i.e. £148k, not the £120k you purchased it for. Does your Mum plan on still living there? This may have a different implication on what I just said.

For inheritance tax (and I might be wrong, as my knowledge is rusty on this and possibly out of date), your Mum is deemed to have made a potentially exempt transfer of £28k (the difference between market value and sale price). You mention she's 67, I am not sure of her health - but should she unfortunately pass away within 7 years, the estate will be liable to pay some inheritance tax on the £28k amount.

Please do not take this as authoritative. My knowledge is rusty, but I hope it allows you to ask the right questions when consulting a professional on this matter.