Buying/renting mother-in-law's house

rubyblues

Hi,
Were in the process of trying to sell our house in the country but things are not moving. We are considering renting it out and renting closer to work.
My husbands mother has suggested we buy/ rent her house. She is currently living there on her own. She has suggested making a granny flat in the garage. She already has plans made up from when her father lived with her but they never went ahead.
Its something we may think about. Its complicated and i don't know what the legalities are. My husband has 2 other siblings so this house is technically their inheritance. She also has a property in the country which is in her will.

Would we have to buy the house off her and pay equal amounts to the siblings or can we rent it off her and make her the granny flat etc.. What happens when she passes on, do we pay his siblings the market value?
Probably too complicated to even go near but worth looking at. If anyone can help id appreciate it. Were also looking at going to a solicitor.

Thanks

The_Conductor

There are several different ways you could potentially deal with this.

1. Buy the property from your Mother-in-law, at a reduced rate, to cater for converting the garage and a portion of the property into a self contained granny flat for her, and allowing her live there indefinitely, and having all of this formalised in the purchase. This might be the preferred option?

2. Renting from her. Any rental income becomes taxable income for her- and would be considered when any social welfare is considered (incl. free phone, television licence, travel, medical card, non-contributory pension etc). These are all going to be means tested- it would be unwise to consider otherwise. It may be that cash might also be considered- as is the case for other social welfare benefits- in which case, it might be better for tax purposes for your mother-in-law to bequeth any inheritances to her children now, and swallow the current tax implications, rather than cross that bridge in the future. Of course she would have to plan for her own future in all of this. You really need professional advice on this.

3. Renting out your own property- any rental income is taxable income (less any allowable costs incurred). You could potentially end up pay over 50% of the gross rental income to the tax man. You cannot offset rental income on your PPR against renting another property- aka you can't say- I'm gettting 1k rent for my home- so I'll use it to rent somewhere else for 1k, and we're all square- it doesn't work like that.......

4. The siblings and their inheritance- how are they likely to view one of their own moving into the family home and taking it on? It sounds like a perfect recipe for a family feud to be honest.

5. If you were to sit down and come up with some formula- by rights, the same formula, the exact same formula, should be offered to the other family members- so as to ensure there is cause for future conflict- there is nothing like property for a family feud.

6. If you're having problems selling your property in the country now- why do you imagine that it'll get easier to do so down the road? The property tax, water rates, septic tank charges etc etc etc- are all thundering down the road towards us with increasing speed. If you really want to sell- you need to undercut the market, and employ any possible ends towards shifting the property. You are selling into a market place shrouded in poor sentiment- but sentiment certainly isn't going to improve in the next 5 years. Just because the property has fallen 50% on its boom time price tag- doesn't mean it doesn't have a hell of a long way to fall yet......

7. Your mother-in-law needs good advice in all of this. She has certain entitlements as a pensioner. If she suddenly comes into a wad of cash- or a steady income flow- as alluded to above- she is treated in a totally different manner than she currently is. She needs good professional advice on this.

No matter what you decide- or your mother-in-law decides- ultimately the three properties are most probably going to have to be sold. Frankly I can't see any particular reason to hold onto them in the current climate.

rubyblues

Thanks so much for your reply. It was very informative and ive taken everything on board. Things are not so simple. Were stepping away from this for the moment as it would be hard to work out and as you say perfect family fued material! Thanks again

rightoldpickle

smccarrick wrote: »

There are several different ways you could potentially deal with this.

1. Buy the property from your Mother-in-law, at a reduced rate, to cater for converting the garage and a portion of the property into a self contained granny flat for her, and allowing her live there indefinitely, and having all of this formalised in the purchase. This might be the preferred option?

2. Renting from her. Any rental income becomes taxable income for her- and would be considered when any social welfare is considered (incl. free phone, television licence, travel, medical card, non-contributory pension etc). These are all going to be means tested- it would be unwise to consider otherwise. It may be that cash might also be considered- as is the case for other social welfare benefits- in which case, it might be better for tax purposes for your mother-in-law to bequeth any inheritances to her children now, and swallow the current tax implications, rather than cross that bridge in the future. Of course she would have to plan for her own future in all of this. You really need professional advice on this.

3. Renting out your own property- any rental income is taxable income (less any allowable costs incurred). You could potentially end up pay over 50% of the gross rental income to the tax man. You cannot offset rental income on your PPR against renting another property- aka you can't say- I'm gettting 1k rent for my home- so I'll use it to rent somewhere else for 1k, and we're all square- it doesn't work like that.......

4. The siblings and their inheritance- how are they likely to view one of their own moving into the family home and taking it on? It sounds like a perfect recipe for a family feud to be honest.

5. If you were to sit down and come up with some formula- by rights, the same formula, the exact same formula, should be offered to the other family members- so as to ensure there is cause for future conflict- there is nothing like property for a family feud.

6. If you're having problems selling your property in the country now- why do you imagine that it'll get easier to do so down the road? The property tax, water rates, septic tank charges etc etc etc- are all thundering down the road towards us with increasing speed. If you really want to sell- you need to undercut the market, and employ any possible ends towards shifting the property. You are selling into a market place shrouded in poor sentiment- but sentiment certainly isn't going to improve in the next 5 years. Just because the property has fallen 50% on its boom time price tag- doesn't mean it doesn't have a hell of a long way to fall yet......

7. Your mother-in-law needs good advice in all of this. She has certain entitlements as a pensioner. If she suddenly comes into a wad of cash- or a steady income flow- as alluded to above- she is treated in a totally different manner than she currently is. She needs good professional advice on this.

No matter what you decide- or your mother-in-law decides- ultimately the three properties are most probably going to have to be sold. Frankly I can't see any particular reason to hold onto them in the current climate.

I have a similar situation.
DH and I are looking to rent out our own home and rent my old famy home. It is currently vacant and it would be the idea that if the owner wished to move back in they could share with us. (They are elderly)
We were thinking of a possible rent to buy option. With a 5 year plan. Is this even an option.
We would be renting our own house out to the local authorities for the 4/6 years they offer.
Any advice?