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Investing on behalf of my Gran to fund the cost of her care home


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Hi, I’m hoping that someone can offer some advice on our current family situation.

 

My Gran recently had an accident and broke her hip causing her to be hospitalised and eventually put into a care home. She was living in a bungalow by herself but that’s no longer sustainable. She has had to leave her bungalow and enter into a care home. She is now going to sell the bungalow to help fund the cost of the care home.

 

The cost of the care home is about £32k per annum and after she sold her bungalow along with her other savings she will have around £280k. We propose to keep £60k of that in immediately accessible savings accounts to pay for the monthly cost of the care home. She has about 8-9 years worth of care  home fees she can pay for out of her savings. She’s 94 but she’s in great shape apart from the hip, so we’re not sure whether she’ll pass away before her money runs out or if it’ll be the other way round.

 

I’m a fairly new BTL investor myself (I only have one BTL property so far) but I’ve suggested instead of leaving it in savings account with poor interest rates, that the majority of my Gran’s money should be invested into buy to let property to try to cover the monthly care home fees with the monthly rental income as well as having a long-term growth plan and for this to be passed down to my Mum when my Gran does eventually pass away.

 

My rough calculations are given a 75% LTV we’d be able to get 10 rentals hopefully yielding around £250-£350 pcm each. The cost of the care home is approximately £3k per month so the rental income should cover the majority of the fees. We are based in Bolton near Manchester so terrace houses are still reasonable value and the yield is pretty good.

 

My mum agrees that property is the way forward but were unsure of the mechanism to achieve this. I have my own buy to let company but I am the sole director so it doesn’t quite feel right that the £220k makes its way into that company given there is my brother and mother to think about.

 

We're not experts in inheritance tax and would love to hear some suggestions about the most efficient way to invest my Gran’s money so I can give her peace of mind to be a long-term rental income coming in that will sustain a monthly payment for the care home.

 

A few options of the top of my head:

 

1)      Form a new limited company with my Gran, myself, my brother and my Mum as directors and Gran either invests or loans the money to the business. 

2)      Gran loans money to my Mum and she starts a BTL company, although she is retired but thinks that she can still get a BTL mortgage.

3)      Use my ready to go BTL company but not sure the best way to get the investment funds into it?

4)      Any other ideas?

  

We’d welcome any ideas or recommendations of people to speak to for advice as we are unsure what’s the next best step would be.

 

Cheers,

 

Rick & Family.

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Hello Rick & Family,

 

I'm the director of a property investment consultants on Chorley New Road (small world)

 

We help people to invest in property safely and without any surprises that could cause problems further down the line.

 

If you had £280,000, I could help you select a few assets and these would all produce much higher than £300pcm. Most of our yields come out at 8/9% NET, which is more like £900pcm for every £100k property.

 

If we leveraged the funds at a 75% LTV, as you suggested, we could expect to be earning £60,000-£90,000 by year one, with scope for it to grow 7% pa.

 

I can also speak to my accountant who would be able to help us get over the IHT hurdle to ensure it's tax fluid as well as efficient.

 

Please feel free to give me a call on 07966225423 and we could set up a meet and put a strategy in place

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On 4/2/2018 at 2:12 PM, charlessrhodes said:

Hello Rick & Family,

 

I'm the director of a property investment consultants on Chorley New Road (small world)

 

We help people to invest in property safely and without any surprises that could cause problems further down the line.

 

If you had £280,000, I could help you select a few assets and these would all produce much higher than £300pcm. Most of our yields come out at 8/9% NET, which is more like £900pcm for every £100k property.

 

If we leveraged the funds at a 75% LTV, as you suggested, we could expect to be earning £60,000-£90,000 by year one, with scope for it to grow 7% pa.

 

I can also speak to my accountant who would be able to help us get over the IHT hurdle to ensure it's tax fluid as well as efficient.

 

Please feel free to give me a call on 07966225423 and we could set up a meet and put a strategy in place

Hello Charles,

 

I'm intrigued by what sort of property investment offers such a large return in such a short amount of time? Is that £60-£90k including capital appreciation or is that simply from rent? Seems pretty ambitious to me but I'd love to be proved wrong on this one..

 

Look forward to hearing more.

 

Thanks,

 

James

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Hello James,

 

Sure.

 

Let me give you an example of one of our recent projects - Metropolitan House, located in Trafford. Let's also stick to one unit, just to make things easier.

 

Price: £115,000

Deposit 25%: £28,750

Gross Rent: 7%

NET Rental Figures: £6,950

Value upon Completion (12 months): £127,000

1 Year Growth + 1 Years Rent: £18,950 

 

If we use your capital as an example & say you bought 9 units:

Price: £1,035,000

Deposit: £258,750

Gross Rent: 7%

NET Rental Figures: £62,550

Value Upon Completion: £1,143,000

1 Year Growth + 1 Year Rent: £170,550

 

Obviously, the above are great returns and the capital growth here was brilliant as the project was located perfectly. However, all of our projects have at-least 8% growth unit completion & 6% NET yield. This is a promise we give.

 

I'd never advise you to buy 9 units at one project, but I could select a portfolio of on market & off market projects for you that ensure you buy correct.

 

This is just one example, but we have done similar numbers on projects such as Tobacco Wharf, 13 Devonshire Rd and many more. Our best project was one in Castlefield that shot up in growth 25% in a year.

 

We have the figures of all our projects, with rentals and valuations which I'm happy to share

 

 

 

 

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