Important, I get this wrong, no sporty car for me ever!

[AndStilliRise]

boyse7en said:

schmokin1 said:

Thanks guys, all interesting stuff. The model we are proposing is that the inlaws pay the cost of conversion, which we think also equates to the cost of servicing the extra mortgage for the annex element of the property for about 20 years.

We know the extra cost we paid for the annex as there is an almost identical property next door that sold the same time we bought ours, but it has no annex. So we can have a rough stab at how much it is going to cost to service.

So if the inlaws pay a lump upfront (of rent if you like) which we plough in to the annex, they get a lifetime lease in return, plus the benefit of speccing the annex how THEY want it (and wheelchair friendly).

If we charge rent then the siblings will kick off (profiting from the inlaws...). DoIng it the upfront way to me is a cleaner arrangement, and we retain full ownership. The inlaws will be protected by written agreement for provision in the event of divorce etc.

Sound fair?

What happens if the in-laws give you the money to do the conversion then die in a car accident next year? Will you have the cash available to pay the siblings' share of that money back?

I applaud your dedication to providing a home and support for your wife's family. I wish more people would look after older relatives in a similar way. Much better for everyone than shuffling them off to a care home.

^ This. I hope you got some pics of the build!

[walm]

schmokin1 said:

Thanks guys, all interesting stuff. The model we are proposing is that the inlaws pay the cost of conversion, which we think also equates to the cost of servicing the extra mortgage for the annex element of the property for about 20 years.

We know the extra cost we paid for the annex as there is an almost identical property next door that sold the same time we bought ours, but it has no annex. So we can have a rough stab at how much it is going to cost to service.

So if the inlaws pay a lump upfront (of rent if you like) which we plough in to the annex, they get a lifetime lease in return, plus the benefit of speccing the annex how THEY want it (and wheelchair friendly).

If we charge rent then the siblings will kick off (profiting from the inlaws...). DoIng it the upfront way to me is a cleaner arrangement, and we retain full ownership. The inlaws will be protected by written agreement for provision in the event of divorce etc.

Sound fair?

The live longer/shorter than 20 years question needs answering.

Siblings need to understand that charging rent for someone living on your property is called capitalism and if they don't like it they should move to Russia. Whether or not you would actually make a "profit" is a highly complex question.
Either way, charging a market rent is the only fair thing to do. Above and you ARE ripping them off but below you are being overly generous.

Also note that the value of the annex when you bought is almost irrelevant. The question is what is it worth NOW.
And it shouldn't be based on the mortgage but on the FULL value at a PROPER interest rate (it is very unlikely to be 20 years at BoEBR of 0.5% - say 4-5% all in rate is appropriate).
Say you had just 10% LTV then obviously the mortgage cost is tiny.

[xjay1337]

schmokin1 said:

Thanks guys, all interesting stuff. The model we are proposing is that the inlaws pay the cost of conversion, which we think also equates to the cost of servicing the extra mortgage for the annex element of the property for about 20 years.

We know the extra cost we paid for the annex as there is an almost identical property next door that sold the same time we bought ours, but it has no annex. So we can have a rough stab at how much it is going to cost to service.

So if the inlaws pay a lump upfront (of rent if you like) which we plough in to the annex, they get a lifetime lease in return, plus the benefit of speccing the annex how THEY want it (and wheelchair friendly).

If we charge rent then the siblings will kick off (profiting from the inlaws...). DoIng it the upfront way to me is a cleaner arrangement, and we retain full ownership. The inlaws will be protected by written agreement for provision in the event of divorce etc.

Sound fair?

No, it doesn't sound fair .

So basically the in-laws want to give you a lump sum to build an annex.
They live in the Annex and you benefit from having it permanently attached to your house (and the increased value you may get) but you can't do anything until they die... which may be 10-20 years...so you can't capitalise on this until they both buck the kicket.

The siblings will "kick off" if you charge them rent to cover the extra cost in heating, electricity, bills etc, that you will have to suffer in the short term.

You may very well end up with a increased value property at the end of it. Not forgetting however, that the increase in value is tied to the area, original property, the annex itself, size, quality, whether it has it's own address, own supply for heating/electric/water/internet etc. After all if it's in a middling area, it doesn't matter how much you increase the space and square footage there will be a limit on the value.

You will not be able to benefit from any increased property value until they die. And you will be worse off in the short term. You'll also end up being carers by proxy because you will be "just next door" and your Sunday mornings, instead of tinkering with the car and going on drives, will be running to Aldi for a pint of milk and the weekly Crossword magazine.
As their health inevitably deteriorates you will end up helping them in the more basic of tasks like cleaning.

When you understandably get sick of this the "siblings" will start to kick off (they sound like self-entitled knobs tbh) and it will be that you are the big bad meanie who has "taken mummy and daddies money away from us"

Irrespective of which, you will be living with your in-laws. Which is a hell no in my book.

I don't see what you have to benefit to be honest.

[MrBarry123]

So a capital investment is made in your house by the in-laws and you're not expecting the siblings to see that investment as part of their inheritance? I applaud what you're offering OP and it would of course be inappropriate for the siblings to put in an inheritance claim when they [your in-laws] move on however that seems naive to me.

The ONLY way to structure this so it doesn't eventually become messy is to rent the place to them. Yes, it may cause problems initially however it is much, much cleaner from a long-term perspective.

[boyse7en]

xjay1337 said:

I don't see what you have to benefit to be honest.

Quite a lot, but I'm not talking in monetary terms. Funnily enough, old(er) people aren't just a drain on families and society you know.

Not wanting to pick on anyone in particular, but all you people saying "don't do it, you'll lose money". I hope you remember it when you are older and may want to have closer ties with your kids/grandchildren.

You're right though that the money side of things needs to be carefully worked out to avoid future issues regarding inheritance etc.

[sideways sid]

Lots of good advice already, and IF you really want to do this OP, it seems sensible to keep all development costs, increases in value etc well away from any future questions over inheritance.

So do the development yourself and charge them for metered bills (which could become a significant cost over 25 years) etc and other costs which they would incur in their own home anyway.

The inlaws can enjoy the proceeds of their house sale and have free choice over their plans for inheritance.

One (unfortunately morbid) question but what happens if the OP and spouse fall under a bus the day after the Inlaws move in, leaving the Inlaws alive and well?

[walm]

sideways sid said:

So do the development yourself and charge them for metered bills (which could become a significant cost over 25 years) etc and other costs which they would incur in their own home anyway.

So enlarge the mortgage to pay for the development and then forgo the rent you could be charging to a third party?
This plan is crazy!

CHARGE THEM RENT!!

[Foliage]

The only real option I see is for you to buy the full property, do up the annex, then sell the annex separately to your in-laws for market value once the work has been completed.

Keep all receipts for the work to show that you aren't making some sort of gross profit but it will likely be intangible because you aren't going to be telling your in-laws other kids how much you paid for the whole property.

Good luck. My parents looked into doing this many many years ago but well didn't..

[sideways sid]

walm said:

So enlarge the mortgage to pay for the development AND CREATE EXTRA VALUE FOR THE HOMEOWNER and then forgo the rent you could be charging to a third party?

EFA.

[xjay1337]

boyse7en said:

Quite a lot, but I'm not talking in monetary terms. Funnily enough, old(er) people aren't just a drain on families and society you know.

Not wanting to pick on anyone in particular, but all you people saying "don't do it, you'll lose money". I hope you remember it when you are older and may want to have closer ties with your kids/grandchildren.

You're right though that the money side of things needs to be carefully worked out to avoid future issues regarding inheritance etc.

But what would he gain?

I understand about looking after your elders but a) they are his wifes parents, not yours
b) (and most importantly) the other children are being little sts making it difficult.

Not taking them up on the offer is the easiest, most stress-free way of doing it. Why not have one of the other "siblings" build an Annex on one of their houses, and let them live there without any costs!?

[walm]

sideways sid said:

walm said:

So enlarge the mortgage to pay for the development AND CREATE EXTRA VALUE FOR THE HOMEOWNER and then forgo the rent you could be charging to a third party?

EFA.

That's a simple finance-101 fail IMHO. You are completely ignoring the opportunity cost of the annex.

Sure the capital they invest on the development may add value over and above the cost when it comes time to sell.
That's a punt every homeowner takes with any extension etc...

What is different in this case is that 1. they need to finance the build - i.e. mortgage costs and 2. THEY CAN'T USE IT!
Most people don't mind putting a fancy new conservatory on their house and paying a bit more on the mortgage and hoping they get the investment back because they get to hang out and have tea with cucumber sandwiches in the overheated poorly ventilated monstrosity they have created.

In this case the OP can't get ANY benefit until he sells and then he MIGHT get his money back and almost certainly won't get his money back at +4% CAGR the mortgage is costing him.

Put it another way.
The OP already has a development built which he rents out at around 4% yield.
Putting the in-laws in there instead is a HUGE opportunity cost.

[walm]

xjay1337 said:

But what would he gain?

I would be quite keen for the mother-in-law to live in an annex if we had one.
1. Free/discounted babysitting.
2. Free/discounted gardening - she loves to garden.
3. Free wood-chopping - she is very nifty with an axe believe it or not.
4. Tennis partner for the missus - I am crap at tennis.
5. I enjoy her company.
6. Perhaps most importantly, my kids would enjoy it and hopefully consider doing the same for me when I am old and lonely!

[ClaphamGT3]

This sort of "my inheritance" mentality drives me mental. One of my brothers obsesses constantly about "his inheritance" - no, you spineless little cock-socket; it isn't 'your inheritance' - It is 'father's money' and, as such, he can do what he wants with it; spunk it on coke and hookers, buy a new car every day till the money runs out, even go into the garden and burn it if he chooses because, until he's actually given it to you, it's not yours; it's his

[walm]

ClaphamGT3 said:

This sort of "my inheritance" mentality drives me mental. One of my brothers obsesses constantly about "his inheritance" - no, you spineless little cock-socket; it isn't 'your inheritance' - It is 'father's money' and, as such, he can do what he wants with it; spunk it on coke and hookers, buy a new car every day till the money runs out, even go into the garden and burn it if he chooses because, until he's actually given it to you, it's not yours; it's his

Sure but if your dad paid for a new 2-bed house on your brother's property and died a year later, wouldn't you be a little annoyed if you brother went on to sell both together and pocketed the lot?

[xjay1337]

walm said:

xjay1337 said:

But what would he gain?

I would be quite keen for the mother-in-law to live in an annex if we had one.
1. Free/discounted babysitting.
2. Free/discounted gardening - she loves to garden.
3. Free wood-chopping - she is very nifty with an axe believe it or not.
4. Tennis partner for the missus - I am crap at tennis.
5. I enjoy her company.
6. Perhaps most importantly, my kids would enjoy it and hopefully consider doing the same for me when I am old and lonely!

Maybe your mother in law is nice and doesn't have crazy children.

I see it as all negatives and don't see him being really any better off.

[boyse7en]

walm said:

I would be quite keen for the mother-in-law to live in an annex if we had one.
1. Free/discounted babysitting.
2. Free/discounted gardening - she loves to garden.
3. Free wood-chopping - she is very nifty with an axe believe it or not.
4. Tennis partner for the missus - I am crap at tennis.
5. I enjoy her company.
6. Perhaps most importantly, my kids would enjoy it and hopefully consider doing the same for me when I am old and lonely!

Thank you. I was going to answer in similar vein. That sums it up.
My kids are a bit older now (6 & 9) and love going to either set of grandparents (all in their 80s). They spend time just making cakes, playing scrabble, identifying birds from the garden, mowing the lawn with grandad. Old people have time...

[quote]Why not have one of the other "siblings" build an Annex on one of their houses, and let them live there without any costs!?

That attitude of "let someone else do it" is not one I can share - whether its picking up litter or helping elderly relatives, we should do what we can and not just assume that someone else will sort it out. If all three siblings take that attitude then the parents end up in a home (when the time comes that they can no longer live alone). Not good for anyone.

[ClaphamGT3]

walm said:

ClaphamGT3 said:

This sort of "my inheritance" mentality drives me mental. One of my brothers obsesses constantly about "his inheritance" - no, you spineless little cock-socket; it isn't 'your inheritance' - It is 'father's money' and, as such, he can do what he wants with it; spunk it on coke and hookers, buy a new car every day till the money runs out, even go into the garden and burn it if he chooses because, until he's actually given it to you, it's not yours; it's his

Sure but if your dad paid for a new 2-bed house on your brother's property and died a year later, wouldn't you be a little annoyed if you brother went on to sell both together and pocketed the lot?

Not in the slightest - what possible business of mine would how my father spent his money be?

[walm]

ClaphamGT3 said:

Not in the slightest - what possible business of mine would how my father spent his money be?

Do I really have to spell it out?

Perhaps your father had always intended to split everything equally between you and your brother but (like the OP) was putting money into the property up front in order to cover 20 years rent.
But with the unexpected death and no adjustment to his will your brother has just trousered potentially six figures that your father would have intended to go to you.

[schmokin1]

Clapham- I applaud your altruistic nature but am with walm on that point. We already said that if the oldies vacated the annex way sooner than expected( haven't nailed it down but I had an idea that 8 or so years was fair) we would have a calc done and work out what we needed to reimburse the other siblings. We would then be able to realise cash from the annex by renting it out to mitigate any loan/remortgage we might have to do to square things up with the other siblings.

Ref intangible benefits I always thought that would cut all ways. Initially we would get assistance with babysitting, school runs etc but later on would obviously have to look after the oldies. All siblings would benefit from knowing the oldies were being looked out for.

Foliage - market value of the annex is v difficult to quantify as it is tied to the main house. Planning is in place to develop it (it is a detached outbuilding) but only as an ancillary dwelling. If it could be spun off as a separate dwelling then it would be too expensive for the oldies to buy from us, being a seriously nice barn on a lovely part of the plot, with tremendous views and a southwesterly aspect....

Walm- I am using 4% per year interest cost in my man maths. I know how much extra mortgage I am carrying compared to buying next door equivalent, annex-less property.

X jay, the oldies will pay their bills etc, and it's a detached annex which is already built in terms of the shell, it needs converting to be habitable. We already bought the structure, plot it sits on and the planning permission to develop it.

Thanks for all the input, interesting stuff

[xjay1337]

Ah, so the building/shell itself is already built. And paid for by you I presume.

So it would need kitting out - Would this be a cash gift so to speak or would you have to mortgage this value and the in-laws then give you that money back?
I'm confused where the mortgage discussions come into this.
Is the discussion of "rent" that by means of a basic ground rent for living in the building?
If the answer to the above is yes then by letting them live there free, you will probably not benefit at the end and it will be goodbye sportscar. Sure you get the bonus (possible) of having it as an increase in value to your property but again this sounds like it's going to be subject to loads of bhyness from the "siblings" and not worth the aggro.

By the time you have children (maybe a few years, I don't know your situation?) would the inlaws be too old/ill to care for them?
Why are they picking you to do it? Is it just because you have an annex?
What were your other plans for the annex?

I still maintain financially the best thing would be to kit it out, spend the £20k or whatever that it would cost to put a nice kitchen/bathroom and good quality finishing and let it out privately.
This will be the best nest egg so to speak and avoid any st with the "siblings" and their precious inheritance.

The only reason to help out the inlaws are empathetic, not financial. Again the simple fact that they are living with you (they will always be over I'm sure and you won't be able to escape) is enough to put me off.
If you want to help them, then do so knowing that it will be at the detriment to your financial situation, in my opinion.

I can't see the annex appreciating enough to recoup 10+ years of paying rent by a private tenant plus the knowledge that it's all yours and that the Wife's brothers and sisters (or other parties) aren't going to take it away.

Personally I wouldn't entertain living with my inlaws irrespective of how old/poorly they are.