Buying house for a relative and then renting it to him

Izzy1994

Hi,

My brother has, shall we say, certain issues in his life, and I fear that in 10-15 years' time he won't have a roof over his head the way he's going.
I want to get together with the family and club together to buy him a small house so that even if he can't pay his electricity bill, he won't ever be out on the street.

There are small inner-city places going for around €25k, and another €5-10k should get them up to an acceptable standard. He doesn't need a whole lot (if he has a bed, the internet, a TV, a kitchen and bathroom, he's happy).
My partner and I have a big mortgage of our own and not a whole lot of money lying around, but together with my dad and sister, we might be able to gather the money together (we don't want to go down the route of getting a mortgage, as it's just too much hassle).

We're thinking of putting the property in my sister's name, and then she can do the following:
- rent it out to my brother
- pay back dad's part of the money to him
- pay us back our money
- eventually even get back her own money

The only problem I see is one of getting the rent money out of my brother. However he goes through phases of being really good and generous on one hand, and then being an absolute pr1ck on the other, so whereas we would very likely go the odd month with no rent, he'll probably pay 80% of the time. And, to be honest, we're not trying to make money from him - if we do, that's great, but the main aim is to keep him from ending up in a hostel.

Has anyone got any suggestions around doing this? Because he's on the dole, we're hoping that he'll be able to keep his rent supplement, but can he do so if he's renting from a relative?

tunedout

Hi there. Maybe a better option would be to get a garden shed or something like that for him for a few months. That way you can gauge his behaviour and see if he is appreciative of what you and your sisters are doing for him? It would also mean you wouldn't have to sacrifice so much money at the outset, you can buy a nice one in Argos for 400 or 500 euro and if you are splitting that then it will be even less. It will also mean your dad won't have to be forking out such a large amount. If he is behaving himself then and pays off for the garden shed maybe you would have a better indication of how he would cooperate in a larger agreement?

djimi

You expect someone to live in a garden shed...?

ABajaninCork

Why is your brother like this as a matter of interest? He's a grown man, so he should be standing on his own two feet, without sounding harsh...Is he working?

I really admire your family for wanting to help your brother. But I think by buying a place for him is simply enabling him to live in the way he has without fear of consequence. You yourself say that there is no guarantee of getting rent money from him. If that happens, then how will you get your money back?

tony81

As a landlord you would have to register with the PRTB, provide a BER, ensure the house in well maintained, repair damages, pay the second house tax, pay the household charge, pay property tax when it comes in, probably responsible for water charges when they come in, pay house insurance, possibly pay for bins and maintain garden/yard/window cleaning, file tax returns, pay income tax on rental income, possibly pay PRSI/USC on rental income.. and if your brother is a nuisance to neighbours you'll be dealing with their complaints too.

Regarding rent supplement.. if your parents are involved it's unlikely rent supplement will apply unless your parents have a history of renting the property and your brother has been assessed as having a housing need.

It's a nice idea what you're suggesting but I don't think you should touch it with a bargepole if you expect to receive rental income. Perhaps you can do a deal with the health board to get the rent supplement paid directly to your bank account? Apparently they don't like doing that, and given that you're family they might view the house as a little investment.

PS the garden shed idea is a bit nuts.

I know this isn't of much help to your actual question, but in my opinion if you ever expect your brother to progress and get over his "issues," then buying a house where he can live forever hassle free is going to be a really bad idea. Not only that, but you'll be adding this new financial element to your already tarnished relationship with him, and you acknowledge the fact that you expect him to be delinquent with the rent which will most certainly lead towards some sort of boiling point.

Obviously I don't know what your brothers issues are so I can't comment with any sort of major accuracy, but I'm just questioning the motives with the possible outcome. i.e. whether doing this nice thing now (Which is to be commended, for sure) for your brother will be far more detrimental to him and his actions in the future.

28064212

Rather than dropping €35,000 for an eventuality that may or may not ever come to pass and opens up a whole can of worms in relation to actually being a landlord, would it not make a lot more sense to just provide €300 a month when/if it ever does come to happen?

liquoriceall

ABajaninCork wrote: »

Why is your brother like this as a matter of interest? He's a grown man, so he should be standing on his own two feet, without sounding harsh...Is he working?

I really admire your family for wanting to help your brother. But I think by buying a place for him is simply enabling him to live in the way he has without fear of consequence. You yourself say that there is no guarantee of getting rent money from him. If that happens, then how will you get your money back?

There are unfortunately people in this life who are not capable of getting themselves together enough for this eg psychiatric problems

ABajaninCork

liquoriceall wrote: »

There are unfortunately people in this life who are not capable of getting themselves together enough for this eg psychiatric problems

Yes, I know. I have personal experience which is why I asked the question.

mark renton

tunedout wrote: »

Hi there. Maybe a better option would be to get a garden shed or something like that for him for a few months. That way you can gauge his behaviour and see if he is appreciative of what you and your sisters are doing for him? It would also mean you wouldn't have to sacrifice so much money at the outset, you can buy a nice one in Argos for 400 or 500 euro a?

He's not talkin bout the family pet here pal

Izzy1994

Thanks for all the replies guys - basically he's useless with money and prone to mood swings. As for work, he has a job now, but for how long? Also, he's just too fond of a "flutter" :mad:

I understand the "moral hazard" argument, but he's in his 40s now, so the days when he could have learned his lesson and mend his ways are long over. He will never learn, even if he ends up under a bridge (he had a spell of homelessness before in his 20s and we only found out years later).

The object of the exercise is not to make money off him, just to make sure he never ends up on the streets because of his own failings. If we can make the money back over a long time, that would be a bonus.

Fair enough question to ask about why we don't just give him the rent if he ever does end up needing it, but I want a solution that will give him security for life... my sister and I will probably outlive him, but there are no guarantees. At least if we do it this way, we can put the house in a will to my son with the proviso that our brother can stay in it until he passes away.

tara73

hi izzy,
first I would like to say your idea shows so much decency and such a nice attitude from you and your family members. my respect to you.

but as others mentioned, is it not too much of a risk for you and especially for your sister?

we actually don't know your brother, it might be a good idea to provide a bit more information to judge better.
so worst case could be he's aware it's the house of your sister and he stops paying rent at all? I don't know, it's just worst case as we don't know how bad he can get...

wouldn't it be a better idea for example to open an account, everybody pays in the same amount (or whatever you agree) and if there are troubles with him there's at least the money there to help?

djimi

Its a nobel idea, but just be prepared that if you buy this house you are doing so under the assumption that you are going to be paying for it in its entirety. Thats not to sound harsh, but if its a case that he is unreliable with money then its the reality of the situation that you entering into.

Tristram

Bit harsh folks, there's a lot can be done with a garden shed these days. A neughbour of mine lives in a fairly shed-like construction.

djimi

Tristram wrote: »

Bit harsh folks, there's a lot can be done with a garden shed these days. A neughbour of mine lives in a fairly shed-like construction.

Im sure that it can, but if you can get a house for €25k why on earth would you want to live in a shed?!!

tunedout

djimi wrote: »

Im sure that it can, but if you can get a house for €25k why on earth would you want to live in a shed?!!

Probably because you would save about €24,400 by getting a shed.

tara73

Tristram wrote: »

Bit harsh folks, there's a lot can be done with a garden shed these days. A neughbour of mine lives in a fairly shed-like construction.

it's not as easy done as said, as far as I'm aware there is planning permission needed to have this arrangement in your garden. could be much more hassle than byuing something.

apart from that, I doubt the family members would consider him living in their garden as a good idea.

ABajaninCork

I still think it's a bad idea to be buying a place to live for someone who works, but likes a flutter. Forgive the pun, but your family are taking a hell of a gamble on this, thinking that he 'might' pay some rent, and at least he'll have a roof over his head.

What happens if you or any of your family can no longer service the house for whatever reason? You sound like lovely people, and like I say I admire you wanting to help your brother. But there is a difference between help and enabling which is what you're proposing to do. Do you or your siblings have children OP? If I'm honest, they should be your FIRST responsibility rather than trying to help a sibling who won't manage his finances.

Where's his sense of responsibility?

I think you need to think this over a lot more carefully.

djimi

tunedout wrote: »

Probably because you would save about €24,400 by getting a shed.

Id love to see you get a shed that is big enough to live in, and get it properly decked out to livable standard, for €6000, let alone €600...

mark renton

tunedout wrote: »

Probably because you would save about €24,400 by getting a shed.

Sure why not just get a green wheely bin and save 24960

Buying cheap house is a good investment, it shouldnt lose money anyway over 10 - 20 years

Also the brother would imo be better off with a little space between himself and the rest of the family

Victor

tunedout wrote: »

Hi there. Maybe a better option would be to get a garden shed or something like that for him for a few months. That way you can gauge his behaviour and see if he is appreciative of what you and your sisters are doing for him? It would also mean you wouldn't have to sacrifice so much money at the outset, you can buy a nice one in Argos for 400 or 500 euro and if you are splitting that then it will be even less. It will also mean your dad won't have to be forking out such a large amount. If he is behaving himself then and pays off for the garden shed maybe you would have a better indication of how he would cooperate in a larger agreement?

Keep it constructive.

Moderator

cuilteanna

I have a friend with a similar situation, the person who was given a place to live has since managed to create more crises requiring yet more money to be handed over. They are basically unemployable, have psychiatric issues and providing them with shelter hasn't really solved much. The family are at their wits end. It's wonderful that you want to help, but be very careful that you don't create more problems for yourselves.

(My OH constantly tells my mother that if she wants to stay with us he'll let her stay in the garden shed.)

StillWaters

Your family sound very close, and it is admirable that you are looking after your vulnerable brothers interests, but I would tend to agree that this could get very messy.
Would it not be easier to agree that when the time comes your dads house is left to you all with a life interest for your brother?

Izzy1994

Thanks once again all for the replies - it's great to get some other people's perspectives on this, since so far all our thinking has been in a bubble.

StillWaters wrote: »

Your family sound very close, and it is admirable that you are looking after your vulnerable brothers interests, but I would tend to agree that this could get very messy.

Yeah, a few of the posters above seem to think that, but the whole idea is that we buy the house, and if we get rent back, great, and if not, well we're prepared for it.

To answer some other questions on where the money would come from: between us all we'd just about be able to stump it all up from savings.

StillWaters wrote: »

Would it not be easier to agree that when the time comes your dads house is left to you all with a life interest for your brother?

Good question, but the house would be unsuitable for him, as it's too big, it's that bit further out, and there's a large garden that would need maintaining, and there's no way he'd do that!

Senna

I think its great that you are considering this, if it was someone in my family I would do the exact same. 25k split 3 ways to ensure a family member is never on the streets (again) is a small enough price to pay. Yes you will probably never see that 25k again and yes it might get messy, but no more messy that if your brother was on the streets.

Just make sure that everyone in your family is on the same wave length, although you accept that you might never get paid, your father or sister might know that it could happen, but they really have to go into this assuming they will never get a penny back.

You will have to be tough with your brother as well, don't let him know for even on second that you would consider not being paid. Your family are putting a whole lot of faith in your brother and he has to consider this as a turning point in his life.

Mrs OBumble

Is your brother on the council housing list? And if no - then why not.

Social housing exists so that vulnerable people are able to get housing they could not afford for themselves.

While it's commendable that you care about him enough to house him, you need to consider both the financial and practical aspects of being landlord to someone with issues like this.

In particular, what will you do if he starts harassing the neighbours or being harassed by them. You won't have leverage over him (what are you gonna do - evict him?) or them (you're not their landlord). You won't have another property in a different estate that you can transfer him in to. You won't have experience of managing difficult tenancy issues, and you will be emotionally involved. Nightmare scenario, IMHO.

I think you can probably help him far more by supporting him to get into social housing, than by becoming his landlord yourself.

GullibleOne

why not get a log cabin i am not sure abou planning permission but could go in garden and it is not a shed

username123

What does the brother think about this idea?

Personally Id be against it. I dont agree with enabling people to be irresponsible. Liking a 'flutter' and being bad with money are both issues that he needs to be able to control himself. Giving him a permanent roof over his head just frees up more money for the 'fluttering'.

Id be far more interested in trying to sort out the root issues with the brother in question tbh. Does he need medical intervention?

djimi

GullibleOne wrote: »

why not get a log cabin i am not sure abou planning permission but could go in garden and it is not a shed

What kind of price are you talking about for something like that?

the_syco

As said, why isn't he on the council housing waiting list? And if he doesn't want to be in a council house as it may be a bad neighbourhood, the €25k house may stand empty in time.

Shelli2

I think it's a lovely idea, I would do anything for my brother too if he needed it.

Maybe your father could insure that you and your sister are paid back out of any inheritance from your father in future years, that way the house being bought now for your brother is merely a loan, as it's a good time to buy right now.

Spindle

I know your intentions are coming from a good place, but in my opinion and from personal experience (dealing with the estate of a relative) mixing family and serious financial issues/housing assets, even in families that have great relationships can lead to huge issues and falling outs.

Izzy1994 wrote: »

..... we can put the house in a will to my son with the proviso that our brother can stay in it until he passes away.

I would be worried about this comment above, you say the house will be in your sisters name, why would your son then be named in a will to receive it? Does your sister not have any husband/children? Inheritance laws (tax) are different when passing assets to nephews/nieces over sons/daughters.

Also there can be tax implications for what you are proposing, as putting the house in your sisters name, you are gifting her the amount you are putting into the purchase of the house. I am not sure the rules and allowances here, but it is something you would have to consider.

If you do go ahead with this, I would advise you have 3 different independent solicitors, draw up contracts for the three involved in the purchase of the house, also outline a contract for your brothers rental of the property. You really need to treat it as a business transaction and remove your heart/feelings from it, even though you are doing it from a good place, it really could turn into a huge mess if you don't have the correct contracts in place and also get the relevant tax advice.

My advice though would be to not do this, by doing something like this you are just supporting and enabling your brother to continue with his life as he is doing now. It would be much better to get him some other help, other than financial. The only way anybody will ever change is if they admit that they have a problem in the first place.

Izzy1994

Mrs OBumble wrote: »

Is your brother on the council housing list? And if no - then why not.

Good question, and one I hadn't considered - possibly because he hasn't got up off his ar$e and applied!

username123 wrote: »

What does the brother think about this idea?

We haven't approached him with it yet. I'm still teasing it out with some of the family (including canvassing all your opinions!)

username123 wrote: »

Personally Id be against it. I dont agree with enabling people to be irresponsible. Liking a 'flutter' and being bad with money are both issues that he needs to be able to control himself. Giving him a permanent roof over his head just frees up more money for the 'fluttering'.

Id be far more interested in trying to sort out the root issues with the brother in question tbh. Does he need medical intervention?

That's a lost cause, TBH. He's had a gambling addiction since he was in school, and he's over 40 now. We've long given up trying to fix it. Now we're in "damage limitation" mode.

(As an aside, and not being smart, have you any idea how hard it is to get a gambling addiction taken seriously in this country? Just listen to those "go racing" ads and look at all the publicity for those parasites in Paddy Power, etc. Even listen to any RTE/Today FM/Newstalk sports bulletin where they're discussing the "odds", and one guy says he has a few bob on Chelsea or whatever. It's all seen as harmless fun.)

Spindle wrote: »

I would be worried about this comment above, you say the house will be in your sisters name, why would your son then be named in a will to receive it? Does your sister not have any husband/children? Inheritance laws (tax) are different when passing assets to nephews/nieces over sons/daughters.

Hadn't thought of that angle Spindle - thanks!

Mostly I was thinking of putting it in my sister's name as she's earning at the standard rate, but what you're saying would make me rethink that. She's not married and has no children by the way.

Izzy1994

Mrs OBumble wrote: »

In particular, what will you do if he starts harassing the neighbours or being harassed by them. You won't have leverage over him (what are you gonna do - evict him?) or them (you're not their landlord).

In fairness, that's the one thing I'd worry least about. He's no trouble to anyone, and he's not bothered about a bit of noise or disturbance. It would take a lot to annoy him, and he's surprisingly charming and diplomatic in situations like that (his work has involved dealing with some of the more difficult elements in society).

username123

Izzy1994 wrote: »

That's a lost cause, TBH. He's had a gambling addiction since he was in school, and he's over 40 now. We've long given up trying to fix it. Now we're in "damage limitation" mode.

(As an aside, and not being smart, have you any idea how hard it is to get a gambling addiction taken seriously in this country? Just listen to those "go racing" ads and look at all the publicity for those parasites in Paddy Power, etc. Even listen to any RTE/Today FM/Newstalk sports bulletin where they're discussing the "odds", and one guy says he has a few bob on Chelsea or whatever. It's all seen as harmless fun.)

I come from a background of addiction, my father was an alcoholic, his father was a gambler, pretty much all the male siblings in my fathers family suffered from one or the other. So yeah, I do know how hard it is, it sucks.

A little bit off topic, but I sense how frustrated you are with the gambling industry, I used to be the same about the drinks industry believe me!! The problem is not the drinks industry or the gambling industry, most people can indulge without it becoming an addiction and where someone is an addict it is them who have to take responsibility.

Unfortunately the person has to want to recover so if you dont have that then its impossible. But - and this comes from my own experiences and my own recovery - enabling the behaviour is not good for the person. Its almost like you look down on the addict, 'well they are not able to get on with a normal life so Ill just do things for them' - its actually a patronising attitude, that they are not good enough, and can make their situation worse because they already feel not good enough, and then people are treating them like their not good enough etc....vicious cycle - Im sure you know all of this from your own research and involvement in the situation.

On the practical side of things. Who is going to be responsible for the household charge, utilities, bins, NPPR etc... on the property? Who will register as a landlord and pay the tax on the rent and sort out all those things? You would really need to talk to a tax accountant I think.

the_syco

username123 wrote: »

On the practical side of things. Who is going to be responsible for the household charge, utilities, bins, NPPR etc... on the property?

This. The bills have to be in his name, as if you keep the bills in your name, you cannot cut him off for non-payment.

If the house has more than one room, he could sublet it as a means to help pay the bills, or just gamble the tenants rent, deposit, etc.