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The original was posted on /r/ukpersonalfinance by /u/YouDontKnowMeFrom on 2023-10-03 19:53:31.

TLDR: Bro is on the hook has decided (after consulting with me) to buy a house that suddenly became available for £255k (+ £40k renovation costs.) We have the money but need advice on engineering a financially wise solution.

FULL VERSION: So our dad sadly passed away. He left us £180k each.

My bro has been looking for a place to buy to call his own, but where he lives is expensive and he can’t move away because of his kids school. All the places he looked at within his budget are pokey 1 bedroom or have serious issues.

Now he’s found a 2 bed semi on a lovely road in a posh area that is basically a shell. It’s been squatted and trashed. It was up for auction last week and got bids for £300K but the bids fell though because the owner wanted payment in a hurry.

In the post-auction phase, they contacted my brother and said the house is about to be repossessed and the owner will sell to anybody who can put cash down. My brother’s put in a lowball bid for £255K which has just been accepted.

I’m panicking a bit because he doesn’t have the means to pay in full on the due date without my support, and I need your help to work out a financially wise solution.

To be fair, he has booked a surveyor to do a survey on Monday, he has already been to the house with a group of 3 builders who have kids at the same school as his kids, and they have told him the house is structurally sound, and have estimated about 40k to do it up. One of them has already renovated his ex-wife’s house, which she is happy with, so I feel happy about trusting their judgement. Bro has already sent me many photos of the place and discussed with me before placing the bid on the house. I will be visiting it on Thursday.

Current situation is he has paid £7k auction fees to secure the bid, and needs to put down another £25k cash on Tuesday. He accepts that he will lose the £7k fee if I decide not to go ahead with supporting the purchase.

Originally I thought he would qualify for an £100k mortgage to be able to buy & do it up with very little financial help from me. Now I find he won’t qualify for a mortgage for another 3 months so I need to work out something.

  • ME: I’m good with money. I don’t earn much (less than many people here) but I work full time in a senior job role I find challenging but fufulling and have various investments, pay into my kids ISAs and almost own my own house with my partner.
  • BRO: My brother is not good with money, has no savings, rents a flat, works full time on a zero-hour contract in an unfufilling job that doesn’t match his interests or qualifications, which he has held down for several years and has shared parenting 50% of a sweet kid with his ex-wife. He has the good sense to let me manage his money, and is on good terms with his ex-wife (a lovely woman) and with people around him.

Can you suggest a financially wise solution? Bro will go along with anything I suggest. I do trust him to do a decent job of the renovation.

Options:

  • We have shared ownership of some kind. Not sure how this is going to work.
    • Should I have majority ownership? It would be a second property for me.
    • Or should I have a minimal share in it? Or equal shares?
  • I buy it in my name and get a mortgage on it for £100k so he has zero ownership and charge him rent to cover mortgage payments. I would basically be a Buy-To-Let landlord and have to pay higher interest and pay tax on income from his rent and other hassles. It would be a second property for me. I’ve been a landlord when I rented out our dad’s flat to cover his care home fees. I know it’s not much fun.
    • As above but with £100k of his money so there is no mortgage.
    • I could insist he gets a lodger and pass the lodger rent to me as repayment. I can trust him with this, as it won’t be ‘his’ money.
  • I own a small limited company, currently with zero income and almost zero assets, which I do a tax return for each year (I was self-employed before I started my current job). I could do some kind of purchase via the company.
  • Other suggestions?

Thanks!