Inherited house - sell or keep?
Discussion
I have previously been a little shy about airing my financial matters on PH but now I’ve been an active member for a while I have come to realise and appreciate the helpful and experienced nature of some of the contributors, and so, finding myself with an important decision that I can’t quite pin down I’m here seeking some opinions.
My beloved grandfather passed away in 2002, and then sadly my grandmother in 2016. They were comfortably off people who had saved, and as is customary in our family the whole estate was passed to the next most senior - my father.
Grandmother and grandfather had, many years before, established a discretionary trust which holds their respective nil band allowances. Dad and I are beneficiaries/executors of that trust.
When Dad organised the matters arising from Grandmothers death he passed 50% of the title of their family home to me, and the other 50% to the family trust.
We rented the property out and the trust drew some income which I have never drawn down.
I love the house - the location - very much, and have always held a long term plan that when I retire (I’m 44 tomorrow!) I would like to build a lovely new house on that plot, and spend half of my time there and the other half abroad. (Spain was the plan but God knows how that works after Brexit!)
The thing is that the house was badly beaten up by the last tenant, who absconded. We are talking about £20k minimum to get it back up to rentable standard. Even when it was rented previously we were only drawing about £1100pcm for it because it’s a rural underdeveloped plot with only three bedrooms that hasn’t been refurbished since 1980 or so. It’s actually worth about £500k as it is, so the yield is shocking.
Bearing in mind that I still have a mortgage which I could clear by selling the house and taking the £250k, and bearing in mind that with the other £250k we could add a couple of decent rental properties to the trust which would bring in the £1100 anyway every month you can see that the sentiment/retirement planning side of keeping this house is costing me dearly.
The reason I have not drawn any rent from the trust is that I’m a higher rate tax payer and it felt silly to be doing that. Dad does take some rents from the trust since it has other properties, and that allows him to be more tax efficient since he doesn’t have kids/mortgage etc to be paying for.
Dad has stated that the decision is 100% up to me and that he’s supportive in either direction. Annoyingly, before this came up, I’ve just signed a new five year mortgage deal at home with a redemption penalty of a few thousand pounds so that’s frustrating but I guess in the scheme of things it probably shouldn’t be allowed to cloud the main issue.
What do you think? Stick to plan? Or sell and save the money every month that I won’t be spending on the mortgage?
My beloved grandfather passed away in 2002, and then sadly my grandmother in 2016. They were comfortably off people who had saved, and as is customary in our family the whole estate was passed to the next most senior - my father.
Grandmother and grandfather had, many years before, established a discretionary trust which holds their respective nil band allowances. Dad and I are beneficiaries/executors of that trust.
When Dad organised the matters arising from Grandmothers death he passed 50% of the title of their family home to me, and the other 50% to the family trust.
We rented the property out and the trust drew some income which I have never drawn down.
I love the house - the location - very much, and have always held a long term plan that when I retire (I’m 44 tomorrow!) I would like to build a lovely new house on that plot, and spend half of my time there and the other half abroad. (Spain was the plan but God knows how that works after Brexit!)
The thing is that the house was badly beaten up by the last tenant, who absconded. We are talking about £20k minimum to get it back up to rentable standard. Even when it was rented previously we were only drawing about £1100pcm for it because it’s a rural underdeveloped plot with only three bedrooms that hasn’t been refurbished since 1980 or so. It’s actually worth about £500k as it is, so the yield is shocking.
Bearing in mind that I still have a mortgage which I could clear by selling the house and taking the £250k, and bearing in mind that with the other £250k we could add a couple of decent rental properties to the trust which would bring in the £1100 anyway every month you can see that the sentiment/retirement planning side of keeping this house is costing me dearly.
The reason I have not drawn any rent from the trust is that I’m a higher rate tax payer and it felt silly to be doing that. Dad does take some rents from the trust since it has other properties, and that allows him to be more tax efficient since he doesn’t have kids/mortgage etc to be paying for.
Dad has stated that the decision is 100% up to me and that he’s supportive in either direction. Annoyingly, before this came up, I’ve just signed a new five year mortgage deal at home with a redemption penalty of a few thousand pounds so that’s frustrating but I guess in the scheme of things it probably shouldn’t be allowed to cloud the main issue.
What do you think? Stick to plan? Or sell and save the money every month that I won’t be spending on the mortgage?
Firstly, happy birthday for tomorrow.
There will be plenty more financially astute that can answer on that front. But what I took from your post is that financially you/your family appear to be in a good place. So I'd be paying far more attention to your retirement dream, than finances. If you really do dream of retiring to that plot then personally I'd keep it.
There will be plenty more financially astute that can answer on that front. But what I took from your post is that financially you/your family appear to be in a good place. So I'd be paying far more attention to your retirement dream, than finances. If you really do dream of retiring to that plot then personally I'd keep it.
Hmmm,
1. Sell, save the £5k(ish) a year mortgage payments - attractive to be Mortgage free.
2. Find £10k (trust funds the other £10k), fix up and carry on, but continue to “make” nothing from it.
3. Develop now, rent out at better rates (capital hefty).
4. Get planning, sell to self builder for top dollar.
Without any emotional attachment I’d say Number 2 would be my least attractive option, your parents and grand parents wouldn’ want to burden you so I would probably go with option 4, fallback plan option 1 at auction and cross fingers for a bidding war.
Regards
Jim
1. Sell, save the £5k(ish) a year mortgage payments - attractive to be Mortgage free.
2. Find £10k (trust funds the other £10k), fix up and carry on, but continue to “make” nothing from it.
3. Develop now, rent out at better rates (capital hefty).
4. Get planning, sell to self builder for top dollar.
Without any emotional attachment I’d say Number 2 would be my least attractive option, your parents and grand parents wouldn’ want to burden you so I would probably go with option 4, fallback plan option 1 at auction and cross fingers for a bidding war.
Regards
Jim
Thanks gents that’s appreciated. Some great points for me to think on.
I hadn’t considered an auction. I hadn’t considered getting planning first.
I had considered that grandad and grandma would want me to do the best thing for me and my family rather than harbour any attachment for the sake of it - so you’re right about that.
Yes as a family we are lucky enough to have a good business and a few properties but I still work extremely hard all the time and have little leisure time. Sometimes maybe it would pay to stop and see if there is anything that can change that a bit. I suppose I’ve got to answer the question “if you do really love the place” - I’ve got to define that a bit and see if that will endure for the next 10/15 years.
Any other thoughts?
I hadn’t considered an auction. I hadn’t considered getting planning first.
I had considered that grandad and grandma would want me to do the best thing for me and my family rather than harbour any attachment for the sake of it - so you’re right about that.
Yes as a family we are lucky enough to have a good business and a few properties but I still work extremely hard all the time and have little leisure time. Sometimes maybe it would pay to stop and see if there is anything that can change that a bit. I suppose I’ve got to answer the question “if you do really love the place” - I’ve got to define that a bit and see if that will endure for the next 10/15 years.
Any other thoughts?
Will you get back the £20k it needs to repair the house in increased sales price (or increased ease of selling)? If so, I'd say get it into good condition & then see how you feel about it. You can then sell it if you aren't attached to it, or rent it out because you know you want to hang on to it. Being mortgage free is good, but in the current market trying to sell a damaged house without taking a big hit might not be easy
If you are already a higher tax payer what is the tax implications of selling, it might be better to keep it for when you want to retire & build then rather than taking a huge tax bill. If you can only get £1100 month then perhaps refurbish along the lines you might want when retiring - the build cost can be set against the income So it might be tax free.
Happy Birthday!!!
First thoughts, doing it to rent it out at that sort of yield does appear to be financial madness.
Equally, don't forget that selling includes agency fees and whilst I don't know how the trust has been established there are likely to be some pretty hefty CGT accrued over that time frame. So you will have legal and accountancy fees to pay too.
This is not to say this is a bad option for you, but others might be better ones.
It may be worth looking at selling your current home, renting for a while whilst you use the proceeds of your house sale to build your ideal home on this plot, making this your new primary residence.
You then have a whole host of option open to you, from living there to selling it for a much higher price with no CGT to pay.
Another idea could be to partner up with a builder who redevelops the land at an agreed price with hime covering the redevelopment costs and your contribution being the value of the land. Then you all take a higher pro-rata share of the sales proceeds.
None of these may be suitable of course, I just trying to inject some other ideas!
Have a great day!
First thoughts, doing it to rent it out at that sort of yield does appear to be financial madness.
Equally, don't forget that selling includes agency fees and whilst I don't know how the trust has been established there are likely to be some pretty hefty CGT accrued over that time frame. So you will have legal and accountancy fees to pay too.
This is not to say this is a bad option for you, but others might be better ones.
It may be worth looking at selling your current home, renting for a while whilst you use the proceeds of your house sale to build your ideal home on this plot, making this your new primary residence.
You then have a whole host of option open to you, from living there to selling it for a much higher price with no CGT to pay.
Another idea could be to partner up with a builder who redevelops the land at an agreed price with hime covering the redevelopment costs and your contribution being the value of the land. Then you all take a higher pro-rata share of the sales proceeds.
None of these may be suitable of course, I just trying to inject some other ideas!
Have a great day!
What you need to do is determine what your life plan is/what goals what lifestyle you want.
You know the date when your home mortgage will be cleared
You know what your current pension pot is - and can back of fag packet calculate how much extra you will have paid in by the mortgage free date.
You know what age you can draw state pension
You can verify how many more qualifying years you require to do before you get full state pension
You know the same for your wife.
So you could hold that house after fixing it up until the point you are mortgage free and at that point sell either your home or that pad leaving 1 remeaining and use that cash to subsidise your early drawn pension to match the state pension or more so you’d be indifferent come 67 or whatever age it is for you as to 55 years old.
To me having that as A plan it’s your “backstop” you know you can do it and you can assess if that matches your desires from life.
There may be another option that appears between now and then but having one sound financial plan is a great starting point.
Health is also something to consider and that sadly can impact anyone at any time
You know the date when your home mortgage will be cleared
You know what your current pension pot is - and can back of fag packet calculate how much extra you will have paid in by the mortgage free date.
You know what age you can draw state pension
You can verify how many more qualifying years you require to do before you get full state pension
You know the same for your wife.
So you could hold that house after fixing it up until the point you are mortgage free and at that point sell either your home or that pad leaving 1 remeaining and use that cash to subsidise your early drawn pension to match the state pension or more so you’d be indifferent come 67 or whatever age it is for you as to 55 years old.
To me having that as A plan it’s your “backstop” you know you can do it and you can assess if that matches your desires from life.
There may be another option that appears between now and then but having one sound financial plan is a great starting point.
Health is also something to consider and that sadly can impact anyone at any time
Exactly what I was hoping for - thanks so much.
I’m now brimming with alternative thoughts thanks to these contributions.
From memory (need to check with Dad who is away this week’s) the CGT issue is largely ok due to the house passing to grandma and grandads nil band preserved in the trust. It gets a little complicated with these matters and I need to firm up facts clearly.
I’ve actually started to consider if my thoughts as a knock down and start again are actually the right approach. The area isn’t so incredible that the bricks and mortar on the plot are irrelevant like when you have a £2m plot so clearly I need to qualify where I’m getting the idea of “rebuild” from vs an extensive renovation.
I’m now brimming with alternative thoughts thanks to these contributions.
From memory (need to check with Dad who is away this week’s) the CGT issue is largely ok due to the house passing to grandma and grandads nil band preserved in the trust. It gets a little complicated with these matters and I need to firm up facts clearly.
I’ve actually started to consider if my thoughts as a knock down and start again are actually the right approach. The area isn’t so incredible that the bricks and mortar on the plot are irrelevant like when you have a £2m plot so clearly I need to qualify where I’m getting the idea of “rebuild” from vs an extensive renovation.
Julian Thompson said:
Exactly what I was hoping for - thanks so much.
I’m now brimming with alternative thoughts thanks to these contributions.
From memory (need to check with Dad who is away this week’s) the CGT issue is largely ok due to the house passing to grandma and grandads nil band preserved in the trust. It gets a little complicated with these matters and I need to firm up facts clearly.
I’ve actually started to consider if my thoughts as a knock down and start again are actually the right approach. The area isn’t so incredible that the bricks and mortar on the plot are irrelevant like when you have a £2m plot so clearly I need to qualify where I’m getting the idea of “rebuild” from vs an extensive renovation.
Regarding the CGT, this does appear to be far more straightforward that I originally considered. Still worthwhile having a quick meeting with an accountant though to, as you say, firm this up.I’m now brimming with alternative thoughts thanks to these contributions.
From memory (need to check with Dad who is away this week’s) the CGT issue is largely ok due to the house passing to grandma and grandads nil band preserved in the trust. It gets a little complicated with these matters and I need to firm up facts clearly.
I’ve actually started to consider if my thoughts as a knock down and start again are actually the right approach. The area isn’t so incredible that the bricks and mortar on the plot are irrelevant like when you have a £2m plot so clearly I need to qualify where I’m getting the idea of “rebuild” from vs an extensive renovation.
You and your family are obviously very financially aware so I doubt you are going to make a bad decision either way.
This is one of the PH first world problems, to be honest!
Let us know how your thoughts progress and I am sure you will get further useful input!
Happy Birthday again!!!
OP - I am in the same situation. We have a house in Discretionary Trust which has a somewhat chequered rental history (last tenant butchered pigs in it) and disappeared owing nearly £3k and on which we have just spent 15k to get it habitable. New tenants move in in 10 days or so. It's also pretty hopeless as a financial proposition.
My view is that I will pass on what we inherited in the best condition I can manage but I can't lay my hands on the cash to do what you are proposing. Sounds like you might be in a position to leave something better than you inherited.
My view is that I will pass on what we inherited in the best condition I can manage but I can't lay my hands on the cash to do what you are proposing. Sounds like you might be in a position to leave something better than you inherited.
I understand. One of the things Dad said to me before he left for holiday the other day was that he’d be fine to sell, fine to keep but that the only scenario that would be irksome to him was the one where we spend the money to rejuvenate the house only to be blighted once more by a bad tenant from the off and end up in short order exactly back where we are again now.
I went up to the house earlier and tried to plan some changes that might make it a great sale proposition as a renovated house with more spent on it (thinking £75k spend to sell for £600-£650k) and I made a little progress but honestly it’s very difficult.
The place is desolate and every time I look at something - anything - I see in my mind how that looked when I was a little boy and as soon as that happens my focus shifts and I find myself standing there just remembering the amazing times I had there as a child. A few seconds seem to pass and I realise I’ve been there half an hour and done nothing! I really need to get a grip!
I went up to the house earlier and tried to plan some changes that might make it a great sale proposition as a renovated house with more spent on it (thinking £75k spend to sell for £600-£650k) and I made a little progress but honestly it’s very difficult.
The place is desolate and every time I look at something - anything - I see in my mind how that looked when I was a little boy and as soon as that happens my focus shifts and I find myself standing there just remembering the amazing times I had there as a child. A few seconds seem to pass and I realise I’ve been there half an hour and done nothing! I really need to get a grip!
Julian Thompson said:
I understand. One of the things Dad said to me before he left for holiday the other day was that he’d be fine to sell, fine to keep but that the only scenario that would be irksome to him was the one where we spend the money to rejuvenate the house only to be blighted once more by a bad tenant from the off and end up in short order exactly back where we are again now.
I went up to the house earlier and tried to plan some changes that might make it a great sale proposition as a renovated house with more spent on it (thinking £75k spend to sell for £600-£650k) and I made a little progress but honestly it’s very difficult.
The place is desolate and every time I look at something - anything - I see in my mind how that looked when I was a little boy and as soon as that happens my focus shifts and I find myself standing there just remembering the amazing times I had there as a child. A few seconds seem to pass and I realise I’ve been there half an hour and done nothing! I really need to get a grip!
Mate sounds like your still in the grief part so personally I’d not be making any rush decisions I went up to the house earlier and tried to plan some changes that might make it a great sale proposition as a renovated house with more spent on it (thinking £75k spend to sell for £600-£650k) and I made a little progress but honestly it’s very difficult.
The place is desolate and every time I look at something - anything - I see in my mind how that looked when I was a little boy and as soon as that happens my focus shifts and I find myself standing there just remembering the amazing times I had there as a child. A few seconds seem to pass and I realise I’ve been there half an hour and done nothing! I really need to get a grip!
Welshbeef said:
Julian Thompson said:
I understand. One of the things Dad said to me before he left for holiday the other day was that he’d be fine to sell, fine to keep but that the only scenario that would be irksome to him was the one where we spend the money to rejuvenate the house only to be blighted once more by a bad tenant from the off and end up in short order exactly back where we are again now.
I went up to the house earlier and tried to plan some changes that might make it a great sale proposition as a renovated house with more spent on it (thinking £75k spend to sell for £600-£650k) and I made a little progress but honestly it’s very difficult.
The place is desolate and every time I look at something - anything - I see in my mind how that looked when I was a little boy and as soon as that happens my focus shifts and I find myself standing there just remembering the amazing times I had there as a child. A few seconds seem to pass and I realise I’ve been there half an hour and done nothing! I really need to get a grip!
Mate sounds like your still in the grief part so personally I’d not be making any rush decisions I went up to the house earlier and tried to plan some changes that might make it a great sale proposition as a renovated house with more spent on it (thinking £75k spend to sell for £600-£650k) and I made a little progress but honestly it’s very difficult.
The place is desolate and every time I look at something - anything - I see in my mind how that looked when I was a little boy and as soon as that happens my focus shifts and I find myself standing there just remembering the amazing times I had there as a child. A few seconds seem to pass and I realise I’ve been there half an hour and done nothing! I really need to get a grip!
Had some valuations and chat with agents over the last couple of days. Bit of a strange one this.
They reckon it's worth a maximum, today, of £450k. They agree that if I execute my restoration plan which involves knocking down the garage and rebuilding a bigger one that has extra accommodation above along with a full modernisation it will be worth between £600 and £650k depending on the quality and appeal of the final outcome.
I've costed it out at about £110k as a complete job. That means that as a bare minimum - assuming I got the maximum asking today vs the minimum asking when finished - of £40k of extra value in return for doing the conversion ourselves. If we got £650k then that obviously extends to £90k more.
Is it normal for there to be such an enormous gulf in the price of a "do-er-upper" vs a finished house? My initial personal valuation of £500k sits much more sensibly vs the finished price of £600k-£650k but it's difficult to argue with 2 experienced agents both saying almost exactly the same thing.
They reckon it's worth a maximum, today, of £450k. They agree that if I execute my restoration plan which involves knocking down the garage and rebuilding a bigger one that has extra accommodation above along with a full modernisation it will be worth between £600 and £650k depending on the quality and appeal of the final outcome.
I've costed it out at about £110k as a complete job. That means that as a bare minimum - assuming I got the maximum asking today vs the minimum asking when finished - of £40k of extra value in return for doing the conversion ourselves. If we got £650k then that obviously extends to £90k more.
Is it normal for there to be such an enormous gulf in the price of a "do-er-upper" vs a finished house? My initial personal valuation of £500k sits much more sensibly vs the finished price of £600k-£650k but it's difficult to argue with 2 experienced agents both saying almost exactly the same thing.
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