Me and my dad are buying a house together and I want to know if it’s a good idea or not

[straightshot]

@sakuramochi I totally agree with this, one caveat: make sure you can afford the mortgage yourself and not just hide from affordability checks to get it. If your dad stops paying rent for whatever reason (even non malicious ones) you still need to pay otherwise you get a big ding to your finances and your dad may end up homeless.

 

[narkissos]

@straightshot This increases the risk for the father though, and likely increases the costs of the mortgage, and increases the deposit demands, as it will have to be an explicit BTL mortgage as there won't be any resident living there.

Will it even be possible to avoid the fathers payment to the son being taxable, and the son be obligated for the landlord obligations (EPC may be a high relevant cost for a 40k auction property), rather than going directly to the mortgage if it's obviously set up as a rental agreement necessary for the BTL mortgage.

Mortgaging the current property the son lives in and buying the auction flat with money there would mitigate that presumably.

 

[lovecraftfan]

@narkissos I don’t think you’ll be able to avoid landlord duties such as annual GasSafe checks if you have a tenancy agreement, so make sure you’ve factored in those extra costs (source, my dad won’t give my brother a tenancy agreement because he doesn’t want to pay for these checks every year and my brother doesn’t pay him rent.)

 

[ygking]

@sakuramochi FYI, properties at auction are typically unmortgageable - this house is likely cash only, hence why auctioned property often goes for the lower end of market value.

 

[resjudicata]

@ygking Why is this? Are they in such poor condition or something?

 

[ygking]

@resjudicata It could actually be a large number of reasons, the most obvious being disrepair but also including other things like: a leasehold having only a short number of years remaining, ongoing boundary issues, a low value below a threshold (often £40k), Japanese knotweed, a sitting tenant etc

 

[nooneofconsequence]

@resjudicata Depends on the house, but the reason auctions are liked by buyers (cheaper houses) is the exact reason your average seller would avoid it if they ever had the option. So, if a house is in an auction (especially for as cheap as this one is!) you've gotta wonder why... normally it's because no normal buyer will touch it, which generally means it's un-mortgageable (e.g. no working kitchen, structurally unsound, etc.)

 

[resjudicata]

@sakuramochi Banks are not usually keen on renting to relatives, because you won’t kick them out of they don’t pay.

 

[alea40]

@sakuramochi This method the son would need to lay tax on the rent received.

 

[o0oshadow]

@alea40 Or daughter

 

[alea40]

@o0oshadow True

 

[mike7377]

@sakuramochi Not for his dead he’d legally own it and his dad might not feel protected if the relationship suddenly deteriorated for any reason

 

[ygking]

@strivingforgodsglory In addition to the issues already mentioned, be aware him ultimately 'gifting' his ownership to you could be more complicated than it first appears.
If he does so, unless he pays market rent (declared as income on your tax return and taxed at your marginal rate) this is considered deprivation of assets for the purpose of inheritance tax (it doesn't sound like his estate would exceed the threshold for this, but do check) and more importantly state care.

If he needs to go into care, his assets above a certain level can be used to fund this need. If he gifts you his ownership in the home but doesn't relinquish the benefit, it will be deemed deprivation of assets and could cause serious issues.

 

[lemuil]

@strivingforgodsglory Do you have siblings? Is your Dad's name on the deeds? You'd need a contract, if your having it transferred to you later on. Could get complicated inheritance wise, if you have siblings, if the worst were to happen before the transfer.

 

[nylon]

@strivingforgodsglory Here's something you can do - ask him to get a credit-checking service and show you his credit score, and to drill into the active accounts he has.

If he has a perfect 999 on Experian and has never set a foot wrong, then it may just be a good idea.

However, that report will say whether he's current on any credit he has, whether he's been paying his bills on time, and a whole bunch of other useful things.

If there are any monsters lurking under his stairs, that will quickly tease them out.

If he refuses to let you look, it's an absolutely safe bet he's hiding something - letting someone see your credit report is absolutely right and reasonable if you're currently trying to get them to buy a house with you.

 

[ilovejesusandamerica]

@strivingforgodsglory Usually the list price isn’t what it sells for so how much would that place be on the open market
?

 

[jacqueline9423]

@strivingforgodsglory Whatever you do, make sure you have a written agreement. Family and money can be a toxic mix and you want to make sure that all concerned have the same understanding.

 

[mjmichaels]

@strivingforgodsglory This seems like a very complicated way of doing things and each complication adds risk.

• buying with your dad ties the two of you together financially. If either of you get into financial trouble in the future you will negatively affect the other. Ideally it’s best to avoid merging finances with people other than a spouse.
• buying with your dad on the deeds and then transferring back seems unnecessary, why not just buy it and rent it to him at whatever rate he was going to pay anyway? He can still help you with the deposit (gifted deposits are not unusual) but having it in a sole name would be much easier.

 

[waltweba]

@strivingforgodsglory Buying at auction:
- Normally the guide prices are set low and the house will sell for over that amount (sometimes a lot over)
- Theres often a reason why houses are at auction/at a low price. They could have something that makes them unmortgageable (including having something scary in the legal pack..make sure you check this out)
- There is often high fees not included in the direct house purchase price. Make sure you have read all the buying terms
- It can be tricky to complete in the time you have after the auction date, especially with a mortgage to get arranged. Make sure you have a solicitor ready to take you on (many don't deal with auction property purchases, even cash ones)

In terms of your set up with your dad to buy I don't think it's too bad. It just needs a lot of trust (which a lot of families do have). I'm not sure of the reason to transfer it to you after the term. It sounds like he won't have enough assets for you to worry about inheritance tax and he can write a will to make sure it goes to you over siblings. (Putting it all in your name potentially means more tax to pay for you). A mortgage just in your name might be simpler but sometimes a mortgage provider might want both owners names on a mortgage - and it's fair enough he's an owner after putting money in.

 

[freespirit8]

@strivingforgodsglory Is it freehold? If a flat then you might get hit with very large costs for maintenance (tens of thousands) which might explain why it is at auction / so cheap…