To cut a long story short my parents will soon be coming into inheritance.
My father is not working at the moment, his business stalled in the recession and it brings in about 5000 a year total for us now, my mother is working and I've just finished college with a STEM bachelors and about to go into work. My student debt is < 4k. This has been the situation for the past 5 years or so. Both of them are increasingly looking at retirement, especially my Dad.
Apologies for the wall of text but I'll try to be concise.
My grandfather is passing away soon, and so is my grandmother. Both of them own assets of which my parents are roughly entitled to half of each. My grandfather is unstable and as such the amount inherited from him could be anything from 0 to €150,000 in my estimation.
My parents own a house and the mortgage is nearly paid off, this has been our current residence for 20+ years now. It's worth about €500,000 based on location and overall size. Many people in our neighborhood rent the houses for approx €2000 – 2500 to students, normal people, etc. Our neighbors as 40 year old working professionals with a newborn are renting at the moment, so the demand is there for rental.
My grandmother's house is potentially worth a lot, her neighbor is selling for €1.3 mil roughly. Both sites are approximately 2 acres, however we do not have planning permission and my grandmothers house is borderline derelict.
It would require substantial investment and work to refurbish and put the land back into a good state. It's livable but in a state of disrepair I would say. I wouldn't say it's new family friendly.
My father has a somewhat optimistic view of how this works out for us.
To start, he believes my grandfather's house is worth €1mil, this is simply not the case but he refuses to believe otherwise (it's really worth €300-400k). I'd love to believe otherwise too but all houses in that area are going for €300-400k
He plans to sell our current house and collect about €400k from that too for a total of €800k capital. In reality they will probably get €500-600k total from these actions, possibly less with tax and expenses.
Regards my grandmother's house, he believes it is not possible to rent the property in any manner despite the 2 acres of open fields. People currently keep horses in our fields for free because my grandmother basically lets them. There are rented allotments in the neighboring fields that have boomed. In my opinion there is demand for the land, not for development but for general farm land. Not massive money to be made versus renting, but some at least.
Her house is completely in the countryside, it's not extremely far from the city though but absolutely nothing is within walking distance really.
He believes it currently to be worth €1.3 mil based on the neighbor's property (https://www.myhome.ie/residential/brochure/broomfield-an-grian-blath-killegar-road-enniskerry-co-wicklow/4064046) but the problem is they have strongly developed their property where as my grandmother's house could potentially fall over tomorrow with a bit of bad luck and would require considerable money to refurbish or knockdown and clear. The bathroom is in a bad state, there is plumbing issues, and multiple rooms are just filled with junk. The actual walls and insulation are in varying states of disrepair given the house is about 60+ years old now. He understands this last part.
The land itself around the house has not been maintained at all since my grandfather died. This would be a somewhat major issue for a developer and for planning permission I think.
Thus, my father's idea is to take €400k from the capital I mentioned before and use it to refurbish the entire property effectively. He believes this along with planning permission will somehow magically make it worth €3 mil. In reality I would imagine this will at most bring it up to €1.3mil on par with my grandmother's neighbors in my opinion.
If they sell, half of that will go to my uncle and then minus a sizeable chunk of tax and expenses they will take the rest.
So reality is, ((€1.3mil / 2) – 400k refurbish) = €200k remaining roughly, they've lost money since naturally the money from the sale has to be split. If it didn't they might make a €200k gain or so
Where as he's seeing ((€3 mil / 2) – 400k refurbish) = €1.1mil + 400k from my grandfather's house. So effectively he believes he's doubling his money by liquidating everything and investing the 400k into the property.
His goal is to end up with €1.2mil and be able to buy a house then live on the rest of the money until his pension kicks in after 12 years.
I suggested renting both properties as another idea and buying an apartment or something small with the inheritance from my grandfather's passing. Renting either place in any capacity for 12 years would result in much more profit for him albeit at a monthly rate. Alternatively just live in one and rent the other.
I've never heard of a property doubling in value like that but I'm not an expert at any of this, nor experienced. My main concern is that no one will stop him dumping €400k into my grandmother's property.
If someone who has experience with property valuation and having work done on houses if they could weigh in that'd be great. Is there any kind of backstop in property/housing development to prevent people with unrealistic valuation expectations from dumping large amounts of money into a property?
What I can see happening is him going to someone and asking "I want to put €400k into this, how much will the value go up?" and they'll just say to him, "it should go up by about 20-40%", which it will and then the final valuation will come in at €1.3 mil to his complete surprise since he assumed it was worth that from the start.
I'd hope the reality is that the person evaluating the property would start with evaluating the value of the house currently and then proceeding.
What I really need to know is how property value is determined, especially for rural houses with acres of land. Is it the land or the house that determines most of the value and do values ever increase by 100% like he imagines?
Would we need to get it valued multiple times or will one person be able to determine rough value now, after investment, and so on?
Any thoughts/input appreciated.
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