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Investing In Tax Lien Properties Together - Advice 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 indicates that you both get the whole of the property and if one expires the survivor automatically inherits.
But if you are a cohabiting pair, you would be thoughtful to prefer the tenants in common option, wherein you each carry half the tax lien or property. Where this occurs, it is vital for each partner to make a will expressing that, on death, the deceased's half of the property goes to the survivor. Otherwise, it just goes into the estate. Inheritance tax does apply, however, as the only exception is for married couples leaving property to one another, or same-sex couples who have claimed a civil partnership.
I purchased three houses jointly with my spouse, who died unexpectedly in 2004. Because we had each made a will particularly stating that the survivor would own the properties, I likely inherited them on his death. On the other hand I would have had to sell them to manage the estate. The concern of joint or common ownership is very crucial indeed when buying property and tax lien certificates and should not be left to chance.
There are other important issues 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 hold?
Who pays the loan and how will this influence the equity on re-sale? What occurs when one party needs to sell and the other does not? What comes up in the event of death? How are outgoings to be apportioned? What about life insurance? What happens if there is negative equity? Who pays for upkeep?
Before you ever start investing with a second person, whether this is your wife, partner or friend, it is crucial to draw up a legally binding documents. If you are a close friend or intimate partner, it can sound harsh and calculating to do this, but it is helpful.
If my late partner and myself had not drawn up a Deed of Covenant and each amended our wills, there would have been a confusing muddle on his death. It is also useful to draw up these documents during splitting up, or the friendship nearing an end.
If you have determined that the best and most secure way to invest in property is to utilize your own home, you must be very wise that you are not seen to be running any sort of property development business for profit, as HM Revenue and Customs will take quite dim view if you are, and tax you subsequently.
The main steps of using your own home as an investment are:
Choosing a place in an up-and-coming region, living in it for some years, then selling it on at, you hope, a huge profit;
Purchasing a wreck, doing it up and then selling it on, while living in the place in the meantime;
Building your own home from scratch, staying in it and then selling it on when completed;
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 location that has a self-contained apartment in the basement or in the loft, or upgrading part of your home into a self-contained flat;
Letting out your home to TV and film crews;
Running a small hotel or B&B as well as living in the place yourself.
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