How to advise DD

[cupfinalchaos]

Dd 29 been with partner 5 yrs and they rent together. Neither of them are particularly high earners and dd assumed if they got married they would get a mortgage together. Partner’s dad has now decided to help his son buy a house via a trust fund- so the trust would be taking out a mortgage. It transpires his dad is a very wealthy man. I don’t blame him with the divorce rate as it is. They would both be living there and partner would not want dd to pay rent.

Aibu to help her get a small buy to let so she has something in her (or the mortgage lender’s!) name? We can give her a small deposit. I’m not sure what to do for the best.

buying a property is the worts way to invest money at the moment! Depending on location, of course, she will make at most 1 or 2 % return.
by investing in an ISA she can make around 10%
so that’s what i would advise her - invest the money she will be saving on rent. Over 5 years, investing 1000 a month she can make close to 80k

Well she shouldn’t have kids without getting married and making a joint decision about a shared asset.

A more immediate drawback would be having to sell when they split if DP can’t buy her out. He may not want to get into that position.

But equally she may not want to get herself into a position where she’s homeless and equityless if they split.

Something like this happened to a friend of mine. Husband's company owned the house they lived in and when they divorced she had nothing as there were no marital assets. Tricky.

Get good legal advice, particularly if they marry, as any savings or pension she accumulates during the marriage could be a marital asset and subject to splitting whereas 'his' house won't be.

OP, there might be more to this situation than the value of the house. Will it be her boyfriend's house that she just lives in? I think an ISA would be a great way to save, but what sort of role would she play in this house? Would she be able to decorate it, invest in a new kitchen etc? Or would it be his house that she was allowed to stay in like a lodger.

I can totally see his Dad wanting to ring fence his money but there is a lack of equity here that is more than financial. Might she be better getting her own little flat, him getting his trust owned house and spending time in each other's places rather than living together? I'm not sure I would want to give up that opportunity for someone who is talking about prenups.

She would almost feel 'better off' financially with a boyfriend with less money but a different attitude, perhaps. I think financial inequality can be really difficult to navigate, especially if one party is very keen to look after their own interests without much consideration for the impact on the other person. It feels like a lack of partnership in this situation that makes me feel she could do better. I am sure the boyfriend is very lovely, by the way, but equally young and not thinking about her long term financial situation. It is very good she has you and your DH to do that.

I would worry about accruing savings and investments in her name too though as they will also be marital assets, whereas, as pp says, his assets will be protected. The FIL is really putting your daughter in a very precarious position here, if she stays in the relationship long term….

i feel like this relationship is already being dictated to by the inlaws! If they must have their own way then invest the money yourself for her. Then it’s out of his reach if they do get married. You can always find a way to gift it to her at a later date.

Well that’s perfect then. Just invest the money in stocks and shares isa, she can contribute her savings from not paying any rent too and then when they get married and prepare the prenup, the ISA can be documented in the prenup alongside anything he wants to ringfence.

Dont buy a btl. More hassle than they’re worth and your DD might be with this man till the day she dies.

If you can afford it, do it. If you can’t, encourage her to save and invest what she would be paying on rent every month so she has a nest egg if the relationship goes south.

If they get engaged, make sure she doesn’t give up work if they have kids and ensure that her DH pays into her pension if she chooses to be a SAHM at any point due to parent’s family wealth

It's not unreasonable to want your DD to have some financial security of her own or for her to want the same, but that can look like many things, I wouldn't leap into a BTL, especially if she or you have no experience of this as an income stream.

If she is going to be able to reside in a property without any rent/mortgage costs then she should be able to accrue sizeable savings quite quickly, even on a lower end salary. If this is a route she wants to go down in the future, or the both of them want a BTL as a joint investment then they can arrange this themselves using what one can only assume will be a very healthy savings pot if they are still together in 5-10 years time.

At this point I would be advising her to take steps understand all of the implications of the trust itself, such as what happens should they marry, or split up, will she be financially contributing to household bills only or indirectly contributing to the mortgage etc etc. I would then be advising her to place a focus on saving. She is 29 so well able to seek information out for herself how best to invest this money and frankly it would be all the better for her to be encouraged to do so if she is in a position where she is able to save significantly on a monthly basis and accrue personal wealth.

Why can’t they just buy the house together and sign an agreement to ring fence his deposit in the event of a split?

So is your DD going to give up work if they have DC?

It doesn’t sound much of a partnership!

I think this is tricky. The important thing is that your DD is financially protected should the relationship end- so putting and savings or money gifts into an account she can’t touch unless she needs it is essential. If he insists on a prenup it should also protect any assets in her own name accrued during the marriage as her own and not marital assets - tho UK does not recognise prenups in law. It may also get old being in a relationship where the wealth he brings is not shared - especially if they get married. If he doesn’t want to share his full life with her, how much of a partnership will they ever really have? For how long can she live in a home that isn’t hers and feel like a full and active partner in the relationship? These are chats she needs to have with her other half. But personally my feeling is if you marry someone wealthy, then you should become wealthy and not be held in some kind of asset limbo like a secret mistress.

I think you're getting ahead of yourself. You didn't offer to help her with a buy to let till his dad offered something. Why not let them get on with it, she's been paying rent and now it seems she won't, lots of opportunity to save. If they had split up in the last few years she'd have had to rent somewhere else .... no change then. If they stay together and get married they can buy a place together.

She needs independent financial advice about the housing situation.

A BTL means she will have a lot of responsibility, pay income tax on the income from it, have to pay for all the property safety checks, fix any issues, insurance etc.

I would be looking into her investing money into easy access if she needs it and then looking at stocks and shares ISA or just cash ISAs. Pension is great but it will be locked away until she is at least 58 so you don't want her to invest it all into a pension.

Any savings she has will also be a marital asset so the whole Trust thing does mean she might get shafted. This does completely shift the balance of their relationship. She needs advice and to go carefully.

Being a landlord isn't an easy pathway particularly with a mortgage (I am one, however mine are mortgage free). You would need to do a lot of research & work out a good area, do you know trades to get work done quickly. Don't just look at rental income but also property value increases mine have increased by 50-100%, in the time I have had them
Mortgage interest rates tend to be higher on BTL.
No first time buyer discount. Will she have the financial liquidity to evict & then repair if she gets a bad tenant.
I will want to be protective of my children & finances when they settle down, however I do also think it is important to consider the financial security & stability of any partners.
A possibility -
The trust & yourselves provide a deposit that is ring fenced according to the proportional percentage your daughter & her partner then purchase the rest as tenants in common with a mortgage. (Not purchased as joint tenants)
Example
Trust Deposit - 15%
Your deposit - 10%
75% split between daughter & partner 37.5% each

Invest the money you would have used for a deposit, not in her name. You can give it to her later if she needs it.

Thank you so much for taking that time to respond. He is taking dd to see flats/houses and she gets a say. She can decorate how she likes, it’s hers.. but really it’s not. Your idea about living separately is not for her, as she does want a family one day.
Boyfriend’s father is going through an acrimonious divorce (with subsequent partner) and I’m sure that’s what’s driving it.

It’s far from ideal but they have an amazing social life together and their friends have all become close. He’s a lovely kid and this isn’t coming from him.. but advice from his dad and step dad.

Maybe you’re right I’m getting ahead.. I’m just worried for her.

I definitely wouldn’t advise a BTL unless she actually actively wants to be a landlord. We became landlords unexpectedly when my husband inherited a tenanted property, and it’s been hard work and stressful. You also obviously pay tax on the income, and depending on how much the mortgage is there may not be much profit once all costs have been covered. She would also have to be prepared for any unexpected costs - 1 month after inheriting whilst we were still getting our heads round it all we had to pay £3k for a new boiler. It’s a lot to be responsible for

If I was her I would invest the money that would have been spent on a BTL or on renting somewhere and then if she did ever need to buy anywhere she’d be in a much better position with savings

She should have an investment but a stocks & shares ISA is much safer and easier than a BTL.

F

Managing agents are fairly useless in my experience, they tend to just forward on emails from the tenant and/or commission hideously expensive contractors they get a cut from.

Sometimes the best way to make someone realise something isn't to tell them, it is to ask them. She should ask him "how do you envisage that working if we have children" and if he's a good man the penny should drop that this plan is leaving her vulnerable. If he can't come up with a solution that is fair to both, she doesn't move in with him (or marry him).

If I was you I’d be delighted for my daughter that she’ll be getting free accommodation and advise her to put her spare ££ into an ISA or pension. Being a landlord is a ballache.

Also, she’s nearly 30 - does she really want your input?

Stocks and shares are a doddle. You just have to accept that there will always be a way you could, with hindsight, have done better, and settle for doing well.
I think a lot of money is made by people pretending otherwise.