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Investments

Discuss investments with other users on our Investment forum. For more advice read our tips for saving for your child's future.

Can I put a btl property in my DD’s name. We will both contribute to the deposit?

8 replies

whippitwoowoo · 30/06/2021 09:13

Thinking of investing her ctf when it matures in oct.
I can add to the deposit so it will qualify for a btl mortgage.
Can it be in both names or just hers?

I would manage it for her.

OP posts:
maxelly · 30/06/2021 10:56

Once she's an adult she can own or jointly own property, yes, so in theory this should be possible, assuming you are in England/Wales you could own it as tenants in common with defined shares representing your individual contributions, the mortgage affordability will be assessed on the likely rental income not your personal incomes (assuming your DD at 18 doesn't have much of an income) but you will both likely needed to be named jointly on the mortgage too.

As to whether it's a good idea, I'm sure you know this but when the CTF matures it's up to your DD what she does with the money, not you - is the BTL what she wants to do? Is the idea of the BTL so that she can live in it at university and let rooms to her friends to provide an income, or is it purely an investment vehicle? If the latter there are quite a lot of cons, e.g. if she has previously owned property, even only a small %, even if she's never lived in it, she may lose the entitlement to first time buyer benefits such as stamp duty exemption when she eventually comes to buy her first 'real' home. Also a property is a very illiquid investment, if she wanted to use (some of) the money to fund university expenses or a car or driving lessons or any of the other myriad things 18 year olds need/want she'll struggle to access the cash if it's tied up in a house. Plus you and she will need to pay tax on the rental income (although you may be able to avoid it if the rent is low and your DD isn't working or earning under the personal allowance threshold, you would have to get advice from an accountant) and also CGT when you sell the property (BTL much less tax efficient than it used to be) - and of course all the hassle and expense of managing the property may make it not the best investment choice...

whippitwoowoo · 30/06/2021 12:49

Thanks Maxelly.
Great advice and lots to consider.

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Tippexy · 30/06/2021 13:08

Who’s going to pay the extra stamp duty once she wants to buy her own place?

whippitwoowoo · 30/06/2021 13:37

The idea of a buy to let is for an investment for her, To get her onto the property ladder without taking on the responsibility until she is older.
She won't leave home for quite a few years and this will give her a head start on the ladder. If she didn't want to live in it when she does leave home, she could sell it and get a place to live in wherever she ends up living. It would belong to her. I wouldn't want a stake in any money made on the property.

This is just an idea at the moment. The ctf will mature in October. There will be close to 20k, she is still in college and has a very small wage from her weekend job. This goes on socialising and clothes. I wouldn't want her to be taking on any responsibility of a mortgage at this young age.

im just trying to secure her future, she may go to uni at some point but won't need the CTF for that.

OP posts:
maxelly · 30/06/2021 14:58

Sure, if you don't want any stake in the property and are just topping up the deposit/her trust fund money as a gift, both the ownership of the property and the mortgage could be in her sole name (so long as the mortgage is assessed as affordable based on the rental yield) - but it would then be her legal responsibility to pay it, not yours. I totally understand your desire to protect this money and make sure it's invested sensibly and not frittered away, but a BTL is not the only way to make sure the money is 'safe' and earns an income/grows while she decides what she wants to do and where she wants to live in the future. For instance £20k is a nice amount to invest in a stocks and shares ISA, I have roughly that amount in a managed fund (entirely passive, I don't have to make any decisions other than indicating my overall risk appetite and reviewing once a year) and it earns/grows a nice little bit each month, maybe £100 pcm entirely tax free, although it fluctuates up and down a bit - and that's with it set at medium risk, you could get a better yield still if you are prepared to risk more?

Yes you might 'earn' more with a property investment in terms of headline income but once the mortgage is paid, tax paid, agents fees, insurances and other costs paid, maintenance and repairs accounted for etc it might not come out much more profitable and that's with considerably more effort put in, plus the fact that the major benefit with the ISA is if I want/need access to the cash I can have it in my bank account within 48 hours whereas if your DD ever decided she needed to sell out of the BTL it would likely take up to 6 months to market and sell the property including evicting the tenants, potentially even longer which could be a major PITA.

Also if you don't want your DD to have the responsibility of a mortgage, you'll have to ensure you have enough money yourself available to cover it in full each month even if tenants stop paying rent or you have extended void periods - and then what would happen if (god forbid) anything happened to you or you lost your income? Plus you paying the mortgage on a house you don't own has the potential to get messy legally speaking although parents do do this for their children all the time of course...

I don't want to sound too negative, obviously BTL can still be worth it in certain circumstances and particularly if you are in an area that is likely to see major/above-average house price growth, and/or if you think it's highly likely your DD will actually want to live in the property herself at some stage. But BTL tends to work best as a long-term, 10 year + investment since the upfront costs are high, and so much could change in your DD's life in that time I'm not absolutely sure it's what I'd choose in your shoes...

whippitwoowoo · 30/06/2021 15:35

I think a big concern is how quickly house prices just seem to go up and up.
My ds 21 and his gf have just completed on a house today. Since the offer was accepted in February it’s already gone above what they could afford.

It’s completely bonkers and In this area (South Cambs) prices have only gone one way since we moved here 16 years ago.

All your advice is very helpful and there are questions that I wouldn’t have considered.

OP posts:
fromdownwest · 06/07/2021 15:01

Most buy to let lenders have a minimum income requirement of circa £20k, so it wouldn't be able to just go in your daugthers name.

Technically she would also be the landlord, so would be have to resgister as one (in Wales we have a Rent Smart scheme that landlords have to register and compelte)

She will also have to file tax returns, as the income will technially be hers.

The whole idea seems overly complicated and probably a poor idea.

whippitwoowoo · 08/07/2021 19:56

Yes I’m starting to think that also. It’s useful to explore the idea on here though.

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