Buying a property & making adult child the tenant.

(23 Posts)
Reapwhatyousow Sat 06-Aug-16 22:41:26

Is this possible, are there rules against it? I've been doing some research and have not found the definitive answer. I would need a mortgage but I want to avoid a buy to let mortgage. If anyone could shed light on this I would be grateful.

ThinkAboutItTomorrow Sat 06-Aug-16 22:46:41

We've done it the other way round. There are rules about renting to family. It's a fairly new Europe wide thing, I think since the crash.

It would be buy to let as you are buying to let, obvious I know and I don't think you can avoid it.

Only a couple of mortgage companies do buy to let to family. One is Virgin and I think Leeds BS was the other.

Otherwise no letting to family is in the t&c.

ThinkAboutItTomorrow Sat 06-Aug-16 22:48:36

You might find releasing equity in your current home is easier. Then you can do what you like. But this requires a chunk of equity in your home.

They will only lend 60% anyway.

navylily Sat 06-Aug-16 22:52:46

I don't think there are any rules about letting to family. I let a house out and don't recall being told I couldn't let to family (though I don't) Though you would need a buy to let mortgage unless you can get one based on your own earnings (ie if you don't already have one on your own home)

There are rules that would prevent your DC ever claiming housing benefit if they're renting from a parent, so they'd need to be able to afford whatever rent you charge

navylily Sat 06-Aug-16 22:54:27

Yes, if you've got enough equity in your current home you could remortgage that and buy the house to let out as cash buyers. You'd get a better mortgage deal that way.

BeMorePanda Sat 06-Aug-16 22:57:25

But wouldn't you then have to pay tax on the rental income - if there were no mortgage costs to be paid out of the rental income most of it would be taxable?

TamyQlass Sat 06-Aug-16 23:31:12

Maybe buy the place outright for adult child. Put a 100% mortgage on, charge whatever interest you decide, from 0-? no need to repay any of the principal. If you need interest to repay your own mortgage, there'll be tax implications. A solicitor can sort it all.

Reapwhatyousow Sun 07-Aug-16 15:00:11

Thank you very much, that give me several avenues to explore.

The situation is this:
DC 28 bought a property in 2011. With our help. Has paid the mortgage & all bills etc.

Failed relationship, has carried on with lodgers (3 bedrooms).

DC now wants to give up the property and go travelling & be free of all responsibilities.

We (the parents) wish to take on the property ourselves, have the DC as the named tenant (though DC will be travelling it will be their home to return to - (we do not want DC living with us!!)

We don't want to purchase the property as a buy to let and have a tenant with all the risks. The property is in an area where shared homes are in great demand.

If DC was our tenant, we would give permission to sublet.

The property is well maintained and we treat people more than fairly btw.

I hope all that makes sense.

LIZS Sun 07-Aug-16 15:07:53

Don't think that would work as effectively dc would be an absent ll. Who would rent be payable to and named on AST? How would mortgage company view their security as they would have first charge on the property but you as mortgagee have no right to evict etc.

navylily Sun 07-Aug-16 18:04:04

I think I'd be inclined to stay out of it in your situation. Your DC decided to buy a home, so it's their responsibility to either sell up or let it out to go off traveling. Not your job to bail them out and buy a house they don't want to bother with just so they can have a home to come back to. And why would you want to "rent" a house/room to someone who's not going to be in able to pay you any rent for it?

Reapwhatyousow Sun 07-Aug-16 18:09:37

Rent from the AST would be payable to myself & husband. Rent from the sublet could be paid into a joint a/c with DC & ourselves? DC wouldn't be a problem as a tenant, otherwise we would disinherit on a bigger picture.

BeMorePanda Sun 07-Aug-16 18:24:09

Why doesn't your DC just rent out his own property while he goes travelling? At 28 he is a grown adult and perfectly able to take responsibility for this. He can get an agent to manage the property if he needs to.

Reapwhatyousow Sun 07-Aug-16 18:51:28

BeMorePanda - I agree, on face value of what you have read I would suggest the same. For various painful, personal reasons DC does not want to do that and we agree.

Just to make clear, this is just a technical question for mumsnet. We will be making appointments this week with our bank etc to explore the possibilities. I am seeking the collective wisdom of Mumsnet in the meantime.

BeMorePanda Sun 07-Aug-16 19:03:50

Have you talked to a good mortgage advisor? They should be able to help you find the right mortgage.

Notbread Sun 07-Aug-16 19:19:13

As a former buy to let mortgage underwriter I wouldn't touch that with a barge pole tbh.

Some factors to consider: are you buying the property at market value? Will you be charging market rent? Would DS be willing to sign documentation saying he has no future claim in the property? What happens if the people he sublets to stop paying, who's responsible for covering the rental void? Who would be responsible for maintenance and repairs? What is the long term plan? What happens if DS comes back and doesn't want to live there anymore? What is the benefit to your son in this arrangement? Would you look to sell it back to him?

I don't want answer these questions but there's a lot of factors which make it risky to a lender.

MephistoMarley Sun 07-Aug-16 19:23:25

So your son will fuck off around the world leaving randoms living in the house with no oversight? Because there will be no letting agent or anyone else to keep an eye on things. Then what happens if the rent doesn't get paid or they trash the house or claim squatters rights and change the locks - a hefty legal bill. This seems like a very bad idea. I mean obviously a hefty legal bill could still arise if he let the whole house out to a family but much less likely due to the profile of family tenants rather than single sharers.

Reapwhatyousow Sun 07-Aug-16 20:09:25

MephistoMarley - You have it wrong on all points. Never mind.

Oh dear, I've managed to heap coal upon my head!

Just looking for the best way to keep property within the family.

We will find a way.

Thank you to those that offered some constructive advice.

Turbinaria Wed 10-Aug-16 20:42:51

I think in your position I would offer to keep an eye on the property while your ds is away. Your wish to buy the property then have your ds become the tenant is fraught with legal and financial problems as others have pointed out. This what what PIL did when DH and I went abroad for a few years and rented out our house. We found a family through an agent and rented it out on a 3 year tenancy on a slighly lower rent. The quality of your tenant is crucial and we made sure our house was well maintained and spotless to attract the best. The day to day management of the property was managed by the agent on a 10% fee of the rental income. If there were problems the agent usually sort them out. We also gave the agents our PILs contact details and often they'd be contacted to sort out small issues such as the garden etc. It was also useful for PILs to keep an eye on the place for us.

Turbinaria Wed 10-Aug-16 20:45:27

Forgot to say the tenants were brilliant and apart from reasonable wear and tear they left our house spotless after 3 years.

Reapwhatyousow Wed 10-Aug-16 20:53:56

Turbinaria
Than you. We are seeing the bank tomorrow.

specialsubject Sat 13-Aug-16 17:36:22

Your son can deal with this. He sets it up with a reliable agent (yes, I know...) And can still be the landlord from wherever he is.

He needs to check HMO rules in the locality.

specialsubject Sat 13-Aug-16 17:37:38

Sorry, whatever the personal pain- that's what he has to do.

takesnoprisoners Thu 18-Aug-16 17:24:12

So, what did you decide on OP? Neighbour in a similar situation sad

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