Is this mad?

[coralnailsinsummer]

We live rurally, no mortgage, DD1 just graduated looking for a job, DS1 graduates next summer. Both DC very much would like to live and work in London. DH & I both have well paid jobs. Comfortable rather than seriously wealthy.
We have £500000k in shares, this is not spare money, we will need it for retirement in 5-10 years.
Would it be a good idea to buy a 2 bed flat and rent it to the DC at under market value? I'm aware of SD but won't a flat appreciate more than investments in the next few years?
The DC would have somewhere to live and might be able to save more for a deposit. Both are hoping to have reasonably well paid careers but looking at rental prices it'll take many years to be able to buy.

I might be naive, happy to be advised this is a silly idea.

Have you asked them about it?
What’s their expectation, for example pay rent but deal with minor repairs?
Who chooses where to live
Will that be happy to flat share?
What happens if one gets a partner and moves them in or they wish to move out?

Try and cover all bases with discussion

But as an investment house prices rarely drop significantly an you won’t be affected by a mortgage

Is the plan to liquidate the shares to pay for the flat? In that case, I would not.. You will pay fees to sell your portfolio, the stock market is in turmoil and say you want to retire in 5 years, you need to start "lifestyling" - gradually moving funds to safer havens, e.g. bonds, some cash.

Renting isn't an easy job and can suck up money for repairs. Your DS's may want to live in a different part of London, move in with friends or a partner and eventually start a family. This could be very short term and you'll be left holding an illiquid asset in a falling market.

Thanks for the comments.
I could only see it as a 5 year plan realistically and it does look risky.
If the DC moved out/ didn't get jobs in London we could get in a mess.

Look at the return you have been getting on your investments and weigh up the advantages or disadvantages. Your children will have some security and a reduced rent, and you will be getting capital growth, but taking into account stamp duty and ultimately capital gains tax, be sure this outweighs your current investment. Personally I’d do it. I had about £500k invested and after five years I realised after fees I didn’t have a heck of a lot more, whereas one property I had bought and sold within that time had netted me (after fees and taxes) almost £100k with less initial money!
But as @GreenTulips says you involve your kids and draw up a proper agreement and you must comply with all letting regulations (which isn’t difficult).
I think property is a good investment and five to ten years is long enough to see a return. But I do think the points made by Tulips warrant careful thought - you can’t predict the future but it is highly likely one or both of them will get a serious partner in that time - it could mean one moving out and the other getting a flatmate, and what if one can’t afford their own place after you need to sell?