Discussion
Background: my wife and her 2 brothers each have a share in her late fathers house.
It’s a semi in a scruffy northern city worth approx £110k and has a sitting tenant.
The tenant is fine and pays regularly but as you can imagine split 3 ways (plus upkeep) it’s not a lot each. Besides we could all do with a decent lump sum each.
We have offered it to the tenant but she can only raise £85k which is a fair bit short.
What should we do? Kick the tenant out and try to sell it on the open market? Try and sell it with sitting tenant and would anyone want it and would they pay market price?
One of the brothers has a mate (I know
) who suggested getting an interest only mortgage of £75k and using the rent to pay said mortgage. Split the £75k but I’m unsure how this works, if it’s even possible and what happens later.
Any ideas how to maximise the income?
It’s a semi in a scruffy northern city worth approx £110k and has a sitting tenant.
The tenant is fine and pays regularly but as you can imagine split 3 ways (plus upkeep) it’s not a lot each. Besides we could all do with a decent lump sum each.
We have offered it to the tenant but she can only raise £85k which is a fair bit short.
What should we do? Kick the tenant out and try to sell it on the open market? Try and sell it with sitting tenant and would anyone want it and would they pay market price?
One of the brothers has a mate (I know
) who suggested getting an interest only mortgage of £75k and using the rent to pay said mortgage. Split the £75k but I’m unsure how this works, if it’s even possible and what happens later.Any ideas how to maximise the income?
Gut feeling: sell to the tenant for £85k.
OK, it's £25k under the possible open market value (without a sitting tenant), but split that 3 ways, and your missus is only down £8k.
You'll also save on estate agent's fees, and hopefully get the money a lot faster than waiting for the tenant to leave, then trying to sell.
OK, it's £25k under the possible open market value (without a sitting tenant), but split that 3 ways, and your missus is only down £8k.
You'll also save on estate agent's fees, and hopefully get the money a lot faster than waiting for the tenant to leave, then trying to sell.
clockworks said:
Gut feeling: sell to the tenant for £85k.
OK, it's £25k under the possible open market value (without a sitting tenant), but split that 3 ways, and your missus is only down £8k.
You'll also save on estate agent's fees, and hopefully get the money a lot faster than waiting for the tenant to leave, then trying to sell.
Sounds the simplest way around this.OK, it's £25k under the possible open market value (without a sitting tenant), but split that 3 ways, and your missus is only down £8k.
You'll also save on estate agent's fees, and hopefully get the money a lot faster than waiting for the tenant to leave, then trying to sell.
Save Estate Agent fees for a start, and the hassle of trying to split the monthly income and more so who pays the maintenance, arranges foe repairs etc.
You get the money and invest wisely and that shortfall of £8k will soon disappear.
All 3 parties could get a buy to let on it but it may be an issue if a true sitting tenant as the solicitor may need to report to the lender that there is not vacant possession when the mortgage is put in place and not on an AST.
Edited to add: the vacant possession is probably only relevant if property is being transferred at same time.
Edited to add: the vacant possession is probably only relevant if property is being transferred at same time.
Edited by Caddyshack on Wednesday 9th December 20:45
Thanks all.
I’ve got some figures.
The woman pays £525 per month.We’ve had 2 valuations done both around the £100k mark but I’ve no idea the market just now. The house is in Rochdale btw.
Now if we were to advertise the property even at £90k I make that a yield of 14% if my method is correct .Is that enough to interest an investor?
Another complication is we’re not sure if the tenant can afford even the £85k
Drawweight said:
Thanks all.
I’ve got some figures.
The woman pays £525 per month.We’ve had 2 valuations done both around the £100k mark but I’ve no idea the market just now. The house is in Rochdale btw.
Now if we were to advertise the property even at £90k I make that a yield of 14% if my method is correct .Is that enough to interest an investor?
Another complication is we’re not sure if the tenant can afford even the £85k
£525 * 12 = £6,300 / £90,000 = 7% yield (before costs) - that is not a great result for a northern town.I’ve got some figures.
The woman pays £525 per month.We’ve had 2 valuations done both around the £100k mark but I’ve no idea the market just now. The house is in Rochdale btw.
Now if we were to advertise the property even at £90k I make that a yield of 14% if my method is correct .Is that enough to interest an investor?
Another complication is we’re not sure if the tenant can afford even the £85k
Wilmslowboy said:
£525 * 12 = £6,300 / £90,000 = 7% yield (before costs) - that is not a great result for a northern town.
Cheers, I got that formula the wrong way round 
The consensus in the family I think will be to offer it to the woman first then just put it on the market at the beginning of the year.
One word: Auction
It's an arms length sale so HMRC will be happy. It's quick so not months (years?) of waiting on a tenant who may or may not be able to scrape together some money. It's precisely the type of property that buyers at auction want. Also as there is more than one executor you need to move fast because sooner or later they'll all start disagreeing.
It's an arms length sale so HMRC will be happy. It's quick so not months (years?) of waiting on a tenant who may or may not be able to scrape together some money. It's precisely the type of property that buyers at auction want. Also as there is more than one executor you need to move fast because sooner or later they'll all start disagreeing.
Mr Whippy said:
Isn’t there something about selling an inherited asset “cheap“, as in HMRC worrying itself over losing out on any cap gains.
Definitely worth double checking on the sell cheap to get rid angle and any issues.
I think there is far more chance of HMRC getting involved if you inherit an asset (property in this example) and then sell relatively quickly for a large gain. They might well get a small amount of CGT but they may well be interested in case they missed out on a bigger chunk of IHT, for example if the property was under valued at probate.Definitely worth double checking on the sell cheap to get rid angle and any issues.
Enut said:
mjcneat said:
If it's the property in the picture I'll give you £110K!Enut - "Errrrrr, ummmmm, errrrr ........... no"
House insurance company - "This call is being recorded"
Enut - "Errrrr, ummmmm...." (puts phone down)
Edited by LeadFarmer on Friday 11th December 09:50
LeadFarmer said:
House Insurance company - "Do you live near water, a lake or a river"?
Enut - "Errrrrr, ummmmm, errrrr ........... no"
House insurance company - "This call is being recorded"
Enut - "Errrrr, ummmmm...." (puts phone down)
Like that Enut - "Errrrrr, ummmmm, errrrr ........... no"
House insurance company - "This call is being recorded"
Enut - "Errrrr, ummmmm...." (puts phone down)
Edited by LeadFarmer on Friday 11th December 09:50
I live near'ish Rochdale, I'd say a typical picture would look more like this:
Enut said:
Mr Whippy said:
Isn’t there something about selling an inherited asset “cheap“, as in HMRC worrying itself over losing out on any cap gains.
Definitely worth double checking on the sell cheap to get rid angle and any issues.
I think there is far more chance of HMRC getting involved if you inherit an asset (property in this example) and then sell relatively quickly for a large gain. They might well get a small amount of CGT but they may well be interested in case they missed out on a bigger chunk of IHT, for example if the property was under valued at probate.Definitely worth double checking on the sell cheap to get rid angle and any issues.
So I suppose it depends.
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