If you are a married couple buying a house together, either outright or through tax liens, you will probably be combined tenants. This implies that you both get the whole of the property and if one dies the survivor inevitably inherits.
But if you are a cohabiting couple, you would be sensible to choose 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 remaining partner. Otherwise, it just goes into the estate. Inheritance tax does follow, however, as the only exemption is for married couples leaving property to one another, or same-sex couples who have declared a civil partnership.
I purchased three houses jointly with my spouse, who died unexpectedly in 2004. Because we had each drawn up a will specifically stating that the survivor would own the houses, I automatically inherited them on his death. Alternatively I would have had to sell them to administer the estate. The concern of joint or common ownership is very significant indeed when buying property and tax lien certificates and should not be left to chance.
There are other vital considerations when you are investing in property with someone else, such as: Does one person have ownership and if so, what rights does the other person have?
Who pays the mortgage and how will this influence the equity on re-sale? What occurs when one party needs to sell and the other does not? What happens in the event of death? How are outgoings to be split up? What about life insurance? What if there is negative equity? Who pays for maintenance?
Before you ever start investing with another person, whether this is your wife, partner or friend, it is important 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 essential.
If my late partner and myself had not drawn up a Deed of Covenant and each one amended our wills, there would have been a fearful muddle on his death. It is also essential to draw up these documents in case of splitting up, or the friendship nearing an end.
If you have chosen that the best and most secure way to invest in property is to utilize your own home, you must be very careful that you are not seen to be running any kind of property development business for gain, as HM Revenue and Customs will take a very dim view if you are, and tax you subsequently.
The main methods of using your own home as an investment are:
Choosing a place in an up-and-coming region, living in it for a couple of years, then selling it on at, you hope, a huge profit;
Buying a wreck, doing it up and then selling it on, while living in the place in the meantime;
Developing your own home from scratch, living in it and then selling it on when completed;
Having lodgers or paying guests;
Renting 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 converting part of your home into a self-contained flat;
Letting out your home to TV and film crews;
Having a small hotel or B&B at the same time as living in the place yourself.
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