Do-er upper advice needed

dufferlover

So a bit of background first. I'm an only child and my mother is widowed and she wants to give her house to myself and my husband. The plan would be to completely renovate the house, including a granny flat for her, and turn it in to a forever family home. Ideally we would like to have it all done by the summer of 2018.
The house was built by the council on rural family land in the 1970s. It's obviously habitable but terribly laid out and needs a complete overhaul.
My question is, we have no idea where to start as we've never did anything like this. I know the whole thing is a long way off but we're guessing there's no harm in looking in to things early. What would people recommend as a first step? Get an architect to do drawings, get an engineer to look at it?
Is there any point in my mother putting our names on the deeds until we are ready to do something.
Also, we currently own a house we bought in 2012. We were lucky and bought when things were at rock bottom. At a rough estimate I think we could make approx €100,000 on what we borrowed at the current market rate. So if we made that figure the plan would be to put the €100,000 plus another €50,000 (which we would hope to borrow) in to renovating my mother's place. However, I have two young children and really don't ever fancy living on a building site. So would it be at all possible to stay in our current home for as long as possible. Do bridging loans for this sort of thing exist?
Also if anyone has completed a 'do-er upper' I'd love to hear about your experience, how it went and what you would and wouldn't do if you were starting all over again.
Sorry for rambling! Thanks in advance folks.

sky6

The very first thing you need to do before anything else is to arrange a meeting with a Legal and Tax consultant. The financial implications of what you are proposing are horrendous for you and your Husband. So it's very important that you know how much this could cost you unless it's done in the right manner. you could be looking at Tax costs in the tens of thousands.

Now as to the building. start with outlining what you would like to do and make a few rough Sketches on paper. If your building any extensions go out into the Garden and using flour. or lime, or even a line marker to give you some perspective as to size etc. Take measurements and keep a record or right them on the sketch.
Then arrange a call to your local council planning dept and discuss with the planning officer what you propose and if it's in keeping with the local area planning. They will also give you good pointers also.
Armed with this information then go and talk to an Architect who will help you decide on a plan, Draw up those plans and prepare the planning application for you. He should be able to give you a rough costing based on what you've decided on.
Then get 3 Quotes from reputable builders and decide who to use. Make sure to get a legal contract drawn up and only ever part with money on a phased basis. Say after Foundations and Groud work complete. 1/2 the Block work. Finished Block work. Roof timbers. Roof Completion. and so on.
The process tends to be quite slow. But just keep at it and it will get finished.

But start with the Tax and Legal advice first.

dufferlover

sky6 wrote: »

The very first thing you need to do before anything else is to arrange a meeting with a Legal and Tax consultant. The financial implications of what you are proposing are horrendous for you and your Husband. So it's very important that you know how much this could cost you unless it's done in the right manner. you could be looking at Tax costs in the tens of thousands.

Now as to the building. start with outlining what you would like to do and make a few rough Sketches on paper. If your building any extensions go out into the Garden and using flour. or lime, or even a line marker to give you some perspective as to size etc. Take measurements and keep a record or right them on the sketch.
Then arrange a call to your local council planning dept and discuss with the planning officer what you propose and if it's in keeping with the local area planning. They will also give you good pointers also.
Armed with this information then go and talk to an Architect who will help you decide on a plan, Draw up those plans and prepare the planning application for you. He should be able to give you a rough costing based on what you've decided on.
Then get 3 Quotes from reputable builders and decide who to use. Make sure to get a legal contract drawn up and only ever part with money on a phased basis. Say after Foundations and Ground work complete. 1/2 the Block work. Finished Block work. Roof timbers. Roof Completion. and so on.
The process tends to be quite slow. But just keep at it and it will get finished.

But start with the Tax and Legal advice first.

Thanks a million for that. Do you mind if I pick your brain a tiny bit re the tax implications thing. Will I be liable for tax considering it's a mother giving her daughter the property or is it the fact my husband is involved that will have tax implications?
The whole idea is really still in its infancy so hence all the questions. In terms of paying for work, do banks entertain the idea of bridging loans or would we be looking at being forced to sell our current place and rent until the re-vamp is done?

Dudda

Above advice is good but I'd talk to the architect before meeting the planners. You could end up showing something to the planners that the architect advises against in favour of a better option and the architect should be able to argue their design if planners have any concerns.

sky6

Basically it's you who will have the main problem as I assume it to you your Mother is transferring the house too and not both you and your husband. I'm not in the legal or financial field so you really need to get independent proper professional advice.
Most advisers will give the first consultation free. But even so it would be worth it to pay 50 or 100 Euro to get the correct advice. After all there's big sums of money involved. Ask for any advice given in writing especially if you are paying for it.

My understanding is that your Mother would be liable to corporation Tax at 33 % of the Market value of the property. Then you would be liable to Capital acquisitions tax of a similar figure. So you can see how proper advice is very important.

I wouldn't be thinking of bridging as it's expensive and only for short term use. At the end of the Day the bank will want to see how much of your own cash you are putting into the project. Along with your ability to repay any loans. They will also most likely need your Mother to sign as Guarantee for the loan as it's her home until it legally becomes yours. They may be willing to take the equity in your present home as a guarantee against any loans also. They may even require both. It will also depend on the amount of the loan involved.
Again you need legal advice as to what you are signing up to.
Don't let your enthusiasm for the project get in the way of sound judgement or advice.

mazza

You really need to pay for some independent financial and tax advice on this issue. Solicitor is probably a good starting point.

I'm don't work in this area but have been through something similar, though not identical fairly recently.

There are considerations in relation to mothers transfer to you (which you will have a tax free limit on), possibly who's name to put deeds in (may attract tax to your husband). Also, for stamp duty due, possibly whatever right of residence your mother may ask for which may block you getting a mortgage for the shortfall.

With respect the points immediately above re. tax, while well intentioned, not correct in my understanding. Poster is spot on tho that the money involved warrants proper advice and planning.

HTH

Angry bird

Seeing as it's very early days, I'd go for a pre planning yourselves, you can always go back for feedback over a proposed design. You'll want their policies re alterations and extensions and what that means for your home. Will septic tank need to be upgraded, what planning contributions are charged, tips re site specific siting and design. Ask nicely and you'll get a lot of info to chew over. When ready hire an architect and go from there.

earlyevening

Completely incorrect. No corporation tax -what company is making a profit?
No capital gains tax on your mother arises on sale of family home.
You only pay capital acquisition tax over 280000 inheritance over the course of your lifetime. But read revenue.ie or pay for the advice if you like.

sky6

Sorry I meant to say Capital gains tax. As I've said previously I'm not a pro in this field. My understanding is that the Mother will be liable for Capital gains tax based on the value of the property at the time of the transfer. The gain is assessed on the difference between the pur price when the mother purchased it and the Estimated valued at that time of the transfer. Any gain real or otherwise is assessed based on the difference and any capital gain is taxed at 33 %.
Unfortunately your not allowed to just hand over property in this country, unlike in the uk.
Here the person gaining the property is then liable for Capital acquisitions tax. It's at this point the Inheritance Tax could be used to offset any liability. As I understand it.
The Gov are talking about increasing Inheritance Tax back up to 500k which might solve all of the ops problems if she can hang on a few more years.

JimmyMW

sky6 wrote: »

Sorry I meant to say Capital gains tax. As I've said previously I'm not a pro in this field. My understanding is that the Mother will be liable for Capital gains tax based on the value of the property at the time of the transfer. The gain is assessed on the difference between the pur price when the mother purchased it and the Estimated valued at that time of the transfer. Any gain real or otherwise is assessed based on the difference and any capital gain is taxed at 33 %.
Unfortunately your not allowed to just hand over property in this country, unlike in the uk.
Here the person gaining the property is then liable for Capital acquisitions tax. It's at this point the Inheritance Tax could be used to offset any liability. As I understand it.
The Gov are talking about increasing Inheritance Tax back up to 500k which might solve all of the ops problems if she can hang on a few more years.

To the best of my knowledge both Capital Gains tax and Capital Acquisitions tax cannot occur on any one transaction as this would be double taxation, therefore the mother in this case does not pay any Capital Gains tax and the Capital Acquisitions tax by the daughter is calculated by the 33% of the current value of the property - remaining inheritance/acquisition tax allowance of category 1, it should be all outlined on the revenue website.

earlyevening

sky6 wrote:

Sorry I meant to say Capital gains tax. As I've said previously I'm not a pro in this field. My understanding is that the Mother will be liable for Capital gains tax based on the value of the property at the time of the transfer. The gain is assessed on the difference between the pur price when the mother purchased it and the Estimated valued at that time of the transfer. Any gain real or otherwise is assessed based on the difference and any capital gain is taxed at 33 %. Unfortunately your not allowed to just hand over property in this country, unlike in the uk. Here the person gaining the property is then liable for Capital acquisitions tax. It's at this point the Inheritance Tax could be used to offset any liability. As I understand it. The Gov are talking about increasing Inheritance Tax back up to 500k which might solve all of the ops problems if she can hang on a few more years.

Why is there capital gains tax if she makes no capital gain. The mother intends to give the house away. Cap acquisition tax referred to already.

mazza

earlyevening wrote: »

Why is there capital gains tax if she makes no capital gain. The mother intends to give the house away. Cap acquisition tax referred to already.

From personal experience, CGT applies on the 'notional' gain made, even if the mother gives the house away and makes no actual gain. The Revenue judge this gain to have made, even if the mother decides to forgo it.

On the upside, note that CGT does not apply if the gain was made while the house was the mothers principle private residence (which you'd have to assume it probably was). I.e she lived there over the years as the value increased and the "gain" was gradually made, although not finally realised.

Also, high exemption limits apply on CAT between parents and children.

I hope the to-ing and fro-ing on tho has at least underscored the importance of expert professional advice to the OP! The money involved and complications (in several aspects) are just far too big to take a chance

mazza

Also, AFAIR, Stamp Duty is payable at standard rate on the *full market value* of the property by the party receiving the property, even it is given to them and not sold, no money is changing hands etc.

The Revenue don't lose out in these arrangements, don't you worry!

mazza

Also, AFAIR, Stamp Duty is payable at standard rate on the *full market value* of the property by the party receiving the property, even it is given to them and not sold, no money is changing hands etc.

The Revenue don't lose out in these arrangements, don't you worry!

Bigus

Start with a tax adviser.

When you have an efficient tax plan that suits your desires , talk to a bank.

Then talk to more than one architect.

Consider knocking the old house and build completely new one , subject to architects/builders and tax advice, it could well be more cost efficient and might be seen as a planning gain to the planning authority.

and also get some free advice on your new house from the estate agent that gets the business of selling your current house, EA will have valuable practical advice, and perhaps can show you examples of what you're trying to achieve.

Only engage a solicitor when YOU have an agreed plan with your mother and husband, the less time the solicitor on the clock the cheaper.

You have a good head on your shoulders and are approaching this in the right way.

Nice project , good luck and enjoy.