buying late mother-in laws house

Hello, I would appreciate any advice on this and will try to keep it specific though it will be hard. My late mother in law has left her house to her 5 daughters, My wife and her 4 sisters. The value of the house is 100,000 euro but my MIL took out a life loan of 30,000 euro a long while back and the life loan due is 58,000 euro leaving the 5 sisters with 42,000 euro between them, Just over 8,000 euro each. This is where it gets tricky, My sisters in law and my wife want to sign their shares of the house over to me and then for me to apply for a mortgage of the sum of the life loan 58,000 euro and pay off the bank. The next step would be to rent the house at about 600.00 euro a month for ten years which would probably cover the majority of the loan. Providing house prices will not hit any lower by then. I am at my wits end at the moment from listening to people with no knowledge of the subject, So If anyone with an insight could put this to rest for me I would be grateful.

1. What do you want to do?

2. Why don't all the sisters simply take possession, apply for their own mortgage and then rent the house out? Taking responsibility for this themselves.

3. Why transfer it to you at all?

mf

salaried said:

I am at my wits end at the moment from listening to people with no knowledge of the subject, So If anyone with an insight could put this to rest for me I would be grateful.

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How nice your inlaws want you to take the risk and they get their cash no questions asked. You actualy answer your question party yourself. What probably started off as a simple solution to your MIL property and inheritance could become very complicated. Get the advice of a solicitor and do the job properly. Otherwise, I can foresee, even if you sort out something now, some party might seem agrieved at some point in the future if this trends to your advantage and God forbid you look like you made money on it!

I agree with mf1 that you should not be sorting this out for them.

The plan is that

- You buy the house from the estate.
- They all give you 8k
- You get a loan for 58K
- You rent out the house

I would suggest that you do a financial plan for each of these steps including all the following

The cost of buying the house including stamp duty and legal fees
The cost of preparing the house to rent out
What will be the shortfall in rent every year which is
Income = ( Monthly rent * 10)
Outgoings = (Maintenance + insurance + loan repayment)


When you come up with a figure for how much money this is going to cost you in the next 10 years, ask them where the money is going to come from.

Remind them that you will own the house and can sell it at any stage if you cant afford the outlay.

salaried said:

Hello, I would appreciate any advice on this and will try to keep it specific though it will be hard. My late mother in law has left her house to her 5 daughters, My wife and her 4 sisters. The value of the house is 100,000 euro but my MIL took out a life loan of 30,000 euro a long while back and the life loan due is 58,000 euro leaving the 5 sisters with 42,000 euro between them, Just over 8,000 euro each. This is where it gets tricky, My sisters in law and my wife want to sign their shares of the house over to me and then for me to apply for a mortgage of the sum of the life loan 58,000 euro and pay off the bank. The next step would be to rent the house at about 600.00 euro a month for ten years which would probably cover the majority of the loan. .

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On the face of it, this is a good deal for you, which leads me to think I am misinterpreting your post. If the sisters sign over the house to you and you get a mortgage for 58k to pay off the loan, are you getting a 100k asset for 58k? Good deal if you are. OR do the sisters want to share the rent for 10 years? What about their 42k? Can you clarify this? Slim

Few questions :
1. Do you already have a house that you own or will you be looking for a mortgage in the future? I ask because if you take out a mortgage now for this house, you may compromise your future chances.
2. How rentable is the property really?
3. If this is to be a buy to let, you may not get a mortgage anyway so it would be moot
4. Think about taxation of this asset - you would be liable for any future property/wealth taxes
5. What happens if you die during the 10 years?
6. What happens after 10 years? Do you then sell the property and give the sisters some money? If so, they would then be liable for capital gains.

See a financial adviser, but I would run, not walk, away from this...

Doing business with family can be dodgy.

How will you and your wife feel if your unable to rent out the property, property values fall a lot more as interest rates rise or there are unforseen expenses doing the house up ?

Alternatively how will your in laws all feel if this turns out to be a great deal for you and your turning a profit in ten years, or sell it for more ?

Be aware relationships can be damaged and might not be worth it. Best of luck.

I think you'd be mad to do this, even if there is an outside chance that if things remain exactly as they are now, you may turn a profit in 10 years. But things rarely stay as they are for 10 years. There are too many intangibles involved and too many sisters and too many years involved.

What happens if you and your wife split up? What happens if you or your wife die? What happens if property values rise in 5 years, and one of the sisters wants her 1/5th slice of a bigger house pie? What happens if one of the sisters die, and her heirs want their mothers share straight away? What happens if one of the sisters (or her spouse) loses her job, and her changed financial circumstances means she needs her share of the value of the house? Who is going to take care of maintaining the property, and finding and dealing with tenants for 10 whole years? Do you get a slice of the rental income for all your time and trouble, or does it all go to the sisters? What happens if you can not rent it out? A lot can go wrong to upset the apple cart in 10 years. Family relationships could be fractured beyond repair. Am sure your wife's mother would not want that.

It is nice that the sisters want to keep the house in the family. But why are they involving you? Why can't they arrange this between themselves if it means that much to them? You say that you are at your wits end thinking about this, and you haven't even done the deal yet. Are you sure you want the hassle, responsibility and worry of dealing with this for 10 whole years, when at the end of the day, you'll be expected to hand the house back to other people?

beffers said:

It is nice that the sisters want to keep the house in the family.

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Renting out a property that you have a sentimental attachment to is looking for trouble. Over 10 years the odds of having bad tenants at some stage is pretty high and you need to factor in how much heartbreak there will be when the house gets damaged.

Thanks all for your advice, MF1, The reason they asked me is that they can trust me to maintain the house and I would not gain anything from it. Huskerdu, No monies would be exchanged between us, I would borrow the 58,000.00 euro and clear the life loan.The house would be signed over to me and after ten years or so of rental income to clear the life loan the house would be sold and the proceeds split five ways between the five sisters, I would gain or want nothing. Slim I hope this clarifies the issue for you. Daisy 2012, Woodie, Balmed out, Beffers and Mrs vimes all your points gave me food for thought, I am not going to go ahead with it. It seems very simplistic to borrow to pay off the loan on the house and hope that the rental income will then pay off my loan in ten or twelve years, even if property prices stay stagnant then yes there is a profit to be made, Not by me and that was made clear from the start. I have no problem with helping family and keeping the house in the family for a nephew or niece somewhere down the line but the potential headaches and pitfalls you have all pointed out has put things in prospective , Thanks for your time and help, Regards Salaried.