Property Finance Advice for my parents

[Jason Andrews]

Hello

I'll try and keep this as brief as possible but to the point. My dad has just reached pension age and still works for himself but struggling physically as a handyman and he's just about surviving financially.

He was running a very successful construction company about 4 years ago but unfortunately, he had a business partner who embezzled 75% of the business funds over time leading to the company into liquidation and then lying about an illness to buy him time to do identity fraud on my dad to sell 3 properties they had. The guy disappeared out of the country and is somewhere in America. Nothing we can do about it as solicitors, forensic accountants are way out of range financially.

Anyway, in the height of the business, the house he purchased was done on an interest-only mortgage for 15 years and that term is ending in 2 years, he's already getting letters from the banks about plans to repay etc. With just about enough money to cover the mortgage per month, bills etc i'm personally having to help pay every few months or so.

Both parents credit files are ruined which does not help.

He's always dreamt about doing his own property developments, naturally starting wh small projects, working as a family to rebuild from the damage caused and get into new builds and larger refurbishments projects.

We're stuck in limbo and need a proper plan on what to do next, he is working slowly on tidying up the house and using my credit cards to fund some of the works with a plan to sell the property within the next year.

I am here today to seek advice.

The market value of the house means he's got between £300k to £400k, this is what we've discussed in an uninformed manner so bear with me:

1. Sell the house, buy another in bad condition, refurb and sell
2. Stay in the house and release equity to buy another
3. Gifting the house / sell it to my sister? (good credit file and good wage) then being on a new term and her being young, the banks may be more likely to lend money.
4. Downsize and relax (he refuses to down tools)

He is willing to take a calculated risk.

I would just love to bring him a solution and a plan, put my mind at rest and get him out of the borderline depression state of mind.

All advice and guidance would be greatly appreciated,

Thank you very much.

 

[FWL]

My reply to the following is:-

1. Sell the house, buy another in bad condition, refurb and sell
This method will avoid any capital gains tax on a sale but would you parents want to live in an unfinished home at their age - at any age really?

2. Stay in the house and release equity to buy another
Mortgages rates are relatively low but there might be an issue with your parents income/age.

3. Gifting the house / sell it to my sister? (good credit file and good wage) then being on a new term and her being young, the banks may be more likely to lend money.
Have you considered IHT? Does you sister have an income which would support such a mortage? If you sister mortgages the property and lends the money to your father, what happens if the property market turns and your sister is left with a debt?

4. Downsize and relax (he refuses to down tools)
Now we are talking

 

[Jules1970]

Hello

I'll try and keep this as brief as possible but to the point. My dad has just reached pension age and still works for himself but struggling physically as a handyman and he's just about surviving financially.

He was running a very successful construction company about 4 years ago but unfortunately, he had a business partner who embezzled 75% of the business funds over time leading to the company into liquidation and then lying about an illness to buy him time to do identity fraud on my dad to sell 3 properties they had. The guy disappeared out of the country and is somewhere in America. Nothing we can do about it as solicitors, forensic accountants are way out of range financially.

Anyway, in the height of the business, the house he purchased was done on an interest-only mortgage for 15 years and that term is ending in 2 years, he's already getting letters from the banks about plans to repay etc. With just about enough money to cover the mortgage per month, bills etc i'm personally having to help pay every few months or so.

Both parents credit files are ruined which does not help.

He's always dreamt about doing his own property developments, naturally starting wh small projects, working as a family to rebuild from the damage caused and get into new builds and larger refurbishments projects.

We're stuck in limbo and need a proper plan on what to do next, he is working slowly on tidying up the house and using my credit cards to fund some of the works with a plan to sell the property within the next year.

I am here today to seek advice.

The market value of the house means he's got between £300k to £400k, this is what we've discussed in an uninformed manner so bear with me:

1. Sell the house, buy another in bad condition, refurb and sell
2. Stay in the house and release equity to buy another
3. Gifting the house / sell it to my sister? (good credit file and good wage) then being on a new term and her being young, the banks may be more likely to lend money.
4. Downsize and relax (he refuses to down tools)

He is willing to take a calculated risk.

I would just love to bring him a solution and a plan, put my mind at rest and get him out of the borderline depression state of mind.

All advice and guidance would be greatly appreciated,

Thank you very much.

Hi Jason

I have been in similar situation with an awful biz partner. I am now in my late 40s and having to start again.

In my opinion do not finance any further and try keep your money in each property as you go. Do you have 300/400k equity? I would look for a run down house in your area that is well below market value either at auction or looking on sites. Make sure it is solid and just needs cosmetic work. As said try keep to your area that you know as I bought a house 100 miles away, big mistake. That's another story.

I would do it up at a bare minimum keeping it fresh and light. Do NEVER pay out top money for a refurb. And re sell. With a healthy profit buy another and keep building up your pot. Eventually you will have enough to buy a big house and split into flats. Once have done a few, buy small land to develop.

I didn't hear what area you are from?

If you need any more advice let me know as I have been there and know how it feels.

All best

Julie

 

[Jules1970]

My reply to the following is:-

1. Sell the house, buy another in bad condition, refurb and sell
This method will avoid any capital gains tax on a sale but would you parents want to live in an unfinished home at their age - at any age really?

2. Stay in the house and release equity to buy another
Mortgages rates are relatively low but there might be an issue with your parents income/age.

3. Gifting the house / sell it to my sister? (good credit file and good wage) then being on a new term and her being young, the banks may be more likely to lend money.
Have you considered IHT? Does you sister have an income which would support such a mortage? If you sister mortgages the property and lends the money to your father, what happens if the property market turns and your sister is left with a debt?

4. Downsize and relax (he refuses to down tools)
Now we are talking

And by the way Jason. I know how your dad feels as it knocks your confidence. It's hard and it can make you feel depressed and also not knowing what road to choose. I have bought and sold houses doing them up in Southeast London since 2010. Also sourced land for developers. But when it went wrong it was awful. But I'm a fighter so I hope your dad will be too

Julie

 

[diyhelp]

Hi @Jules1970

How do you manage to stay so positive? It sounds like you have been through a terrible ordeal.

Can I ask how did you restart again in the property market? Do you work alone now?

 

[Jules1970]

Hi @Jules1970

How do you manage to stay so positive? It sounds like you have been through a terrible ordeal.

Can I ask how did you restart again in the property market? Do you work alone now?

Hi

It was awful. I had panic attacks to be honest. And took ages to sort out.

I have done 5 properties. Two with the biz partner and three myself. I done all renovations. Made good profit.

Also have a flat in Malta and source land sites for larger developers.

One of my mistakes was buying a property further away. As said before maybe it was just the area. The property was solid and done to a good standard as I have always done. But it took ages to sell. So always advise staying in your area.

What have you done and area you are in?

One thing I must do is network more this year and share my experiences.

Kind regards
Julie