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    • MountainTop
    • By MountainTop 14th Apr 18, 10:53 AM
    • 2Posts
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    MountainTop
    Should I buy a house outright for a family member to live in?
    • #1
    • 14th Apr 18, 10:53 AM
    Should I buy a house outright for a family member to live in? 14th Apr 18 at 10:53 AM
    My partner and I work abroad and have a substantial amount of savings.

    My father-in-law has no savings and lives in a rented flat that he soon won't be able to afford when he retires.

    I understand that renting to a family member can be complicated when theres a mortgage involved.

    We had planned to invest in buy-to-let property but we are finding it hard enough to find anyone who will give us a mortgage since we aren't UK residents right now and don't already own property.

    If we can afford to buy my FIL a house outright, without a mortgage, is there any reason why we shouldn't? Is there anything I haven't thought of?

    To me it seems a good investment since he needs somewhere to live, and we want to invest our savings somewhere. Am I wrong?
Page 1
    • marliepanda
    • By marliepanda 14th Apr 18, 10:57 AM
    • 6,896 Posts
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    marliepanda
    • #2
    • 14th Apr 18, 10:57 AM
    • #2
    • 14th Apr 18, 10:57 AM
    Is this going to be a good investment? He can!!!8217;t afford his current flat, he probably will struggle to afford yours. He will also struggle to claim HB if living in the flat of a family member who specifically bought it to rent out to him.

    Id you!!!8217;re doing it to help him and hoping that the equity goes up in the house then nothing to really stop you
    • theartfullodger
    • By theartfullodger 14th Apr 18, 10:57 AM
    • 9,997 Posts
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    theartfullodger
    • #3
    • 14th Apr 18, 10:57 AM
    • #3
    • 14th Apr 18, 10:57 AM
    NEVER rent to friends or family.

    When things go wrong (they will) YOUR marriage may/will suffer. And the pressure not to evict or pursue for rent will be huge.
    • MountainTop
    • By MountainTop 14th Apr 18, 11:04 AM
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    MountainTop
    • #4
    • 14th Apr 18, 11:04 AM
    Thanks for the quick reply!
    • #4
    • 14th Apr 18, 11:04 AM
    I guess I should have said we wouldn't be 'renting' it out to him. Since we wouldn't have a mortgage it would be for him to live in rent free. We would be hoping the equity value would increase and gain some money on the property that way.

    Although I can see that renting to family members can cause problems, one way or another we are going to have to look after him financially, and buying a house seems better than losing money by paying his rent for him.
    • Windofchange
    • By Windofchange 14th Apr 18, 11:05 AM
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    Windofchange
    • #5
    • 14th Apr 18, 11:05 AM
    • #5
    • 14th Apr 18, 11:05 AM
    NEVER rent to friends or family.

    When things go wrong (they will) YOUR marriage may/will suffer. And the pressure not to evict or pursue for rent will be huge.
    Originally posted by theartfullodger
    I'm assuming the OP isn't planning on charging any rent? Seems like they just want to house the father in law somewhere so he doesn't end up on the streets.

    As for whether it is a good idea or not, that rather depends on your outlook on housing. What would you do if there was a period of sustained pressure on prices ahead? If you are looking to hold the property for decades then this isn't such a consideration, but should you need to liquidate it at any point, what would happen if the price had dropped significantly - as we are starting to see happen across the board?

    I would then agree more with the post above about family dramas. Sorry mate, we need to sell this place now to fund x,y,z and we need you out. I think the British public is about to have a rude awakening with regards to property 'investment' - the crazy six figure gains of the past two decades are in my view at an end.
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    • Sea Shell
    • By Sea Shell 14th Apr 18, 11:13 AM
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    Sea Shell
    • #6
    • 14th Apr 18, 11:13 AM
    • #6
    • 14th Apr 18, 11:13 AM
    That would be my primary concern...that if your circumstances change and you need to release the equity in the property, you may have to evict him.
    " That pound I saved yesterday, is a pound I don't have to earn tomorrow "
    • Mojisola
    • By Mojisola 14th Apr 18, 11:14 AM
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    Mojisola
    • #7
    • 14th Apr 18, 11:14 AM
    • #7
    • 14th Apr 18, 11:14 AM
    My father-in-law has no savings and lives in a rented flat that he soon won't be able to afford when he retires.
    Originally posted by MountainTop
    Won't he be able to claim Housing Benefit?
    • theartfullodger
    • By theartfullodger 14th Apr 18, 11:32 AM
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    theartfullodger
    • #8
    • 14th Apr 18, 11:32 AM
    • #8
    • 14th Apr 18, 11:32 AM
    If you wish to support something charitably (a noble aim..) are there other, perhaps more deserving, causes?t
    • worried jim
    • By worried jim 14th Apr 18, 11:54 AM
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    worried jim
    • #9
    • 14th Apr 18, 11:54 AM
    • #9
    • 14th Apr 18, 11:54 AM
    Buy the house, rent it out to some tenants and use this money to prop up the rent shortfall your father in law has. You still own the same asset you intended, he gets to stay in his home and you get a bit of extra cash. Everyone is a winner.
    "Only two things are infinite-the universe and human stupidity, and I'm not so sure about the universe"
    Albert Einstein
    • VintageHistorian
    • By VintageHistorian 14th Apr 18, 1:06 PM
    • 400 Posts
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    VintageHistorian
    Would you be prepared to own the flat for the next 20 years? If he's retiring now the presumably he's in his mid-60s? Given how many people now live in to their 80s you're probably looking at owning the property for the next 20 years, maybe 30 should he go on to have a long and healthy life.

    Who will be responsible for keeping the house properly repaired? Will he be willing to let tradesmen in to do necessary work, or would he block access to them because "I don't like strangers in my home" (a problem we had with my grandmother in her early 80s after my grandfather died)? If you and your wife need to return to the UK in the future (work, children, closer to other family) then will you want to move in to the flat with him while you find somewhere to live? Because chances are he'll resent it after a few weeks, having people walking around "his" home, using "his" kitchen to cook their food, using "his" living room to watch TV after a long day at work.

    I'd echo the suggestion someone said above, if you absolutely have to help him (and honestly, why has he not sorted this out himself before now?) then buy a flat to rent out to someone else, and use some of the money to help him. Family and business do not mix well, and renting out a property is a business. Keep the two aspects as separate as possible, for your sanity if nothing else.
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    • xylophone
    • By xylophone 14th Apr 18, 3:33 PM
    • 27,685 Posts
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    xylophone
    Consult a solicitor about lending your FIL the money to buy a property outright and taking a first charge on it?

    You would need to come to an agreement about interest/repayment etc.
    • 00ec25
    • By 00ec25 14th Apr 18, 5:00 PM
    • 7,333 Posts
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    00ec25
    I guess I should have said we wouldn't be 'renting' it out to him. Since we wouldn't have a mortgage it would be for him to live in rent free. We would be hoping the equity value would increase and gain some money on the property that way.

    Although I can see that renting to family members can cause problems, one way or another we are going to have to look after him financially, and buying a house seems better than losing money by paying his rent for him.
    Originally posted by MountainTop
    on that basis

    Moral position
    obviously providing rent free accommodation for a (close) relative is excellent for both you and him

    Your financial position

    As an investment
    does FIL want to live in the sort of property and in the sort of area that you would choose to buy if you were merely investing for the best guess at future growth?
    House? Flat? Up and coming area? Pitty area with prospects? Pitty area without prospects?

    Tax
    Obviously it would be an investment property for you, so you'd pay Capital Gains Tax when you eventually come to sell it.
    However, your CGT would be (very) slightly reduced if, before sale, you physically moved into it and lived there for a (reasonable) time period as your only/main residence.
    Is that realistic? Would you buy a property for FIL in an area you'd want to live in yourselves?
    If you don't live there, then you are exposed to whatever the CGT rules will be at the point you sell up. Currently they are pay tax on the difference between purchase price and sales prices (less a CGT allowance 11,700 @ 18/19 rate) at 18% and /or 28% tax rate depending on your financial circumstances in the tax year of sale.
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