Buying a house and letting current owner live in it.

[swanny1]

A friend has inherited his fathers house (he was already living with him)

It has everything he needs so he wants to stay. However he doesn't have any savings, or a job that pays well, and is thinking about his retirements in ten years time.

he's thinking about equity release. this would give him some cash as a fall back and let him stay in the house until he dies.

I wondered if he would get a better deal if we bought the house from him via a sort of private equity release (at a percentage of value), and let him stay there until he passes away (hopefully a long time away)

we'd have it as a sort of long term investment

would need a solicitor to draw up a contract, but i wondered if this was ever done?

I have a feeling there is something like this system that operates in france

thanks

[anonymous-user]

Brian May from Queen bought Patrick Moore's house so he could live there for the rest of his life. He had it on a 25 year lease and charged Patrick a peppercorn rent.

https://www.dailymail.co.uk/news/article-2248952/Q...

Are you happy to have the money tied up for what could be a very long period of time?

[Mr Pointy]

Don't even think about it; there are way too many potential issues. If you did it properly you'd buy the place & rent it back to him but even that has problems as it exposes you to all the issues of being a landlord - including paying tax on the income.

[LeoSayer]

I did consider it for my mother-in-law (without telling her) when she wanted equity release.

Your investment would locked up for a long time with no income - probably decades. Is that OK for you?

Then you need to think about the clauses would you want around property maintenance and upkeep, subletting, insurance, wanting to move house, going into care etc? Would you be willing to enforce such clauses on your friend if the need arose?

There are so many potential scenarios for you and your friend to end up hating each other thanks to such an arrangement.

I'm sure your friend would be better served by you helping him to make the right decision.

[Panamax]

swanny1 said:

I wondered if he would get a better deal if we bought the house from him via a sort of private equity release (at a percentage of value)

A. You'll dig yourself a very deep Capital Gains Tax hole to fall into.
Let's say the house is worth £200k. You buy it for £100k and he lives there rent free.
When he eventually dies the house is then worth £300k
If you sell the house you'll be charged CGT at the enhanced rate for residential property on the £200 difference between what you bought it for and what you sold it for (not on the £100k increase in value.)

B. If you do it at all, a market value sale and leaseback seems most sensible - as suggested by Mr Pointy above. But you'll pay enhanced rate stamp duty to buy it, income tax on the rent and enhanced rate CGT when you sell.

[OutInTheShed]

How about a loan secured on the house?

I suspect when we properly analyse all the possibilities we might find that equity release might not be so bad after all?

[Dr Amatisation]

I’ve done it.

[Fundoreen]

sounds dodgy. 10 years till retirement and could live another 20. Will you even be around in 30 years time?

[jamescodriver]

Sale and rent back comes under FCA regulations now, you’ll need to be registered..