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Purchasing Tax Lien Properties Together - Tips For Couples
If you are a married couple purchasing a house together, either outright or through tax liens, you will probably be combined tenants. This means that you both own the whole of the property and if one expires the other automatically inherits.
But if you are a cohabiting pair, you would be wise to decide on the tenants in common option, wherein you each carry half the tax lien or property. Where this happens, it is vital for each partner to make a will stating that, on death, the deceased's half of the property goes to the survivor. Or else, it just goes into the estate. Inheritance tax does apply, however, as the only exception is for married couples leaving property to each other, or same-sex couples who have claimed a civil partnership.
I purchased three houses jointly with my partner, who died suddenly in 2004. Because we had each made a will precisely stating that the survivor would own the properties, I likely inherited them on his death. Otherwise I would have had to sell them to manage the estate. The concern of joint or common ownership is very crucial indeed when investing in property and tax lien certificates and cannot be left to chance.
There are other important factors when you are investing in property with another person, such as: Does one person have possession and if so, what rights does the other person possess?
Who pays the loan and how will this influence the equity on re-sale? What happens when one party wishes to sell and the other does not? What comes up in the event of death? How are expenses to be apportioned? What about life insurance? What happens if there is negative equity? Who pays for repairs?
Before you ever start investing with a different person, whether this is your wife, partner or friend, it is crucial to draw up a legally binding document. If you are a close friend or intimate partner, it can seem harsh and calculating to do this, but it is helpful.
If my late partner and myself had not prepared a Deed of Covenant and each amended our wills, there would have been a complex muddle on his death. It is also important to draw up these documents during splitting up, or the friendship nearing an end.
If you have determined that the best and safest way to invest in property is to use your own home, you must be very wise that you are not seen to be running any type of property development business for profit, as HM Revenue and Customs will take quite dim view if you are, and tax you accordingly.
The main ways of using your own home as an investment are:
Choosing a place in an up-and-coming region, living in it for a few years, then selling it on at, you hope, a vast profit;
Purchasing a wreck, doing it up and then selling it on, whenever living in the place in the meantime;
Building your own home from scratch, staying in it and then selling it on when finished;
Having lodgers or paying guests;
To rent out your home to international visitors as a holiday let as you are not there yourself;
Buying a place that has a self-contained flat in the basement or in the loft, or upgrading part of your home into a self-contained flat;
Letting out your property to TV and film crews;
Running a small hotel or B&B as well as living in the place yourself.
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