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Property/DIY

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Original poster

Should I buy them out?

16 replies

Watto1 · 27/04/2015 14:36

My 2 brothers and I have inherited my late DM's house. It has been on the market for a few months with 6 or 7 viewings but no offers.

I am wondering whether it would be a good investment to buy my brothers out of their share of the house and then rent it out? Both brothers have no interest in renting it out between the 3 of us.

To buy my brothers' shares of the house would cost me approx 100k (50k each). Now I don't have that kind of money sitting around! However, my and DH's home is mortgage free. A quick Google tells me that mortgaging our home would be the cheapest way of raising the money. It would cost approx 450 per month. Houses like mum's rent for approx 600 per month(where is the pound sign on this tablet?!). So 150 ish left over for insurance and other expenses. Not a great amount but the house would (hopefully!) increase in value.

I don't know what to do! I know being a landlord can be difficult but isn't property always a good investment? I could never afford it under any other circumstances. Basically, I would be buying a house for two-thirds of its market value.

Any thoughts advice very gratefully received.

OP posts:

0ddsocks · 27/04/2015 14:42

I'm not an expert by any means but £150 per month probably wouldn't end up being a huge profit once you've added in expenses of being a landlord. Also not sure what your income is, but would you pay tax on that £150?

cestlavielife · 27/04/2015 14:42

dont underestimate the amount of work and/or expense involved in renting out a house. first off - budget for complete redoration etc before you let it out. how much would that be?

MovingOnUpMovingOnOut · 27/04/2015 14:45

You could look at getting a buy to let mortgage for the extra and leave your family home out of it? However, the mortgage provider will want to know that you can afford it and rent should be at least 125% of the mortgage payment (usually interest only for b2l) with a 5% tolerance to allow for interest rate rises.

Timetodrive · 27/04/2015 16:21

I would check out taxation implications as the rental profit would be the income you make and you might not be able to account for morgage payments if the rental is not connected to the debt it is servicing.

Original poster

Watto1 · 27/04/2015 16:27

Thanks for all your replies.

Wouldn't need to redecorate as we did that prior to putting on the market. Kitchen and bathroom both fairly new and mum kept the place immaculate.

I did consider a buy to let mortgage but that would be more expensive if I had a repayment mortgage and I am uneasy with interest only.

Oh I just don't know!

OP posts:

Original poster

Watto1 · 27/04/2015 16:30

Hadn't considered tax . I think my Big Plan to go into property is looking less and less possible

OP posts:

OnePlanOnHouzz · 28/04/2015 07:39

My biggest regret was letting the family sell my grandmothers home - I so wish I'd been in a position to buy it back then !! Property investment in UK still seems like a good idea to me !

wowfudge · 28/04/2015 07:45

In your position I would wait until after the election, see what effect the outcome may have for your sale, get together with the agent and discuss strategy to sell the place.

ThinkIveBeenHacked · 28/04/2015 07:53

Could you sell yours and pay your brothers outright and move into your Mums old house? Obviously only if it were a better/bigger house/good location.

ThinkIveBeenHacked · 28/04/2015 07:54

Is it priced.correctly?

WhoNickedMyName · 28/04/2015 08:00

I think you need to do a lot more research on being a landlord and what exactly that entails before you consider buying them out.

BasinHaircut · 28/04/2015 12:51

I think you need to think about why it isn't selling, and if there is a good reason, ask yourself why you consider buying it to be a good financial move if no-one else does.

If its over priced then will you be paying the currently valued price to your siblings? If so, then you will be paying over the odds for it. That doesn't make good financial sense.

Also, I wouldn't want to hang on to a house that I would have emotional
ties to. It can only spell heart break as a rental IMO.

Could you sell the house and invest your share in a different, possibly cheaper rental property if that's what you want to do?

HereIAm20 · 28/04/2015 14:02

If you do it definitely get a bel mortgage on the property you are letting out and then the interest can be offset against rental income. Save money from the rental income to repay capital in chunks now and then and hope for a rise in property prices eventually

Spell99 · 28/04/2015 16:20

You can offset the "interest" of the mortgage against the income. its the purpose of the loan not the property its borrowed against. Remember your repayment portion is profit even if you are using it to pay off the loan. Do you have pensions? a rental does make a very good pension investment. Have you checked what the rental market is in the area?

You have to be able to emotionally detach form the property, you have to treat it like a mathematical equation. It will be hard if it was your family home.

You could always ask the agents to test the rental market to make your sums easier. If you find a tenant reasonably quickly you can rent it out and then borrow to pay off your brothers.

Spell99 · 28/04/2015 16:33

Id consider interest only too. that would be £167pcm at 2% interest. Its a business and only the most basic of businesses don't have debt.

Original poster

Watto1 · 28/04/2015 19:14

Thank you so much for your advice everyone. Much appreciated

I've been doing some more research today and feel a bit more confident in this idea. Thinking about it, an interest only mortgage on mum's house does make sense financially.

Pension-wise, I do have a couple of frozen pensions but I've been a SAHM for the last 5 years so I haven't been adding to my pension pot for a while. Any income from this venture would be very useful in that regard. Also I am currently a non-taxpayer; I just work 7 hours per week on minimum wage. I would have to make a hell of a profit before I slip into having to pay tax!

Ive had a quick chat with a pal of mine who is a letting agent (handy!) and she thinks that mums house would be snapped up by a tenant very quickly. Its a 3 bed in spitting distance of the best school in the area. Mind you, the estate agent it is on the market with said the same thing.

I've researched landlord insurance and it wouldn't be too expensive.

Emotionally, I think I have already detached from the house. It was never my home and it doesn't feel like mums house any more.

Plan now is to see what my brothers think of the idea when I see them at the weekend. Then make an appointment to see another friend who is a financial advisor and see what she thinks. If all are in agreement, I can get the wheels in motion.

Maintenance-wise, my BIL is a builder and always knows the right person for a job if he can't do it himself. Also DH's best mate is a gas man so that's the gas safety certificate sorted! Unfortunately, I'm not friends with or related to a solicitor so will need to find one of those!

I'm sure I will be back for more advice but in the meantime I am frantically googling all I can about the pros and cons of becoming a landlord.

Thanks again

OP posts:

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