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Original poster

Buy to let - daughter will be tenant

91 replies

Twoshoesnewshoes · 30/11/2022 19:26

Has anyone done this? Officially it seems to not be allowed to rent your buy to let property to family, how do they know/check?
trying to find a way to help my daughter on the housing ladder!
TIA x

OP posts:
Original poster
Twoshoesnewshoes · 01/12/2022 20:43

Thanks, I can afford it. I prioritise my children with my savings and it works out fine.
no she can’t buy somewhere for £160 cos they are crack dens, also she needs a two bed so she can rent out a room to help with costs.

can anyone recommend a guarantor mortgage provider, or help with advice if you’ve done something similar for your own children?

OP posts:
yoyy · 01/12/2022 20:48

It would be much better if she could buy herself. Prices aren't going to go crazy in the next few years. How long would it take her to save 30k if she lived at home?

Original poster
Twoshoesnewshoes · 01/12/2022 20:51

When she’s at home she saved £1k a month, but it’s not practical now as she works in a city 1.5 hours from us.
now she is paying rent for a room she is not able to save.

OP posts:
yoyy · 01/12/2022 20:53

Is she not able to save anything?

yoyy · 01/12/2022 20:54

How long would it take her to save up a chunk? I think the 1.5 hr commute isn't the worst thing in the world.

Original poster
Twoshoesnewshoes · 01/12/2022 21:30

No, not able to save.

OP posts:
Ciri · 01/12/2022 21:37

You’ll pay tax on the rent she pays you plus there will be stamp duty and capital gains implications. You need to take advice before doing this.

Twiglets1 · 01/12/2022 22:07

Twoshoesnewshoes · 01/12/2022 20:43

Thanks, I can afford it. I prioritise my children with my savings and it works out fine.
no she can’t buy somewhere for £160 cos they are crack dens, also she needs a two bed so she can rent out a room to help with costs.

can anyone recommend a guarantor mortgage provider, or help with advice if you’ve done something similar for your own children?

I was looking at something Barclays offer - it’s not exactly a guarantor mortgage but a parent does guarantee payments are made which means the young person can borrow a bit more. Also, Nationwide do Guarantor Mortgages.

Soontobe60 · 02/12/2022 08:04

Twoshoesnewshoes · 01/12/2022 20:51

When she’s at home she saved £1k a month, but it’s not practical now as she works in a city 1.5 hours from us.
now she is paying rent for a room she is not able to save.

She’s young, childless and has parents who can support her. A 90 minute commute is very doable in her circumstances!
my DD bought a house in a rubbish area with some help towards her deposit from us, but after 18 months she had enough equity and increased salary to buy a bigger house in a nicer area. 5 years on, she has an even bigger income and more equity. We have helped her with some urgent renovation costs but she’s mainly done it by herself.

BernadetteRostankowskiWolowitz · 02/12/2022 08:06

How does she not have a deposit if she's lived rent free with you for 2 years? If her rent used to be 750pcm plus bills, that's 24k she could have saved.

BernadetteRostankowskiWolowitz · 02/12/2022 08:07

Twoshoesnewshoes · 01/12/2022 20:51

When she’s at home she saved £1k a month, but it’s not practical now as she works in a city 1.5 hours from us.
now she is paying rent for a room she is not able to save.

So what happened to the 24k she saved when she did live at home?

oiltrader · 02/12/2022 08:50

caroleanboneparte · 01/12/2022 09:40

She needs to just buy the £110k property.

Another option is for her to have a lodger. She can earn £9500 in rent from a lodger without it being subject to tax. This could increase her mortgage affordability.

Look at one beds that can actually be used as 2 beds ie separate living room from kitchen so it can be used as a 2nd bedroom.

nope. unless it is guaranteed income, the lodger wont be taken into account

Smudgybuggerler · 02/12/2022 09:00

Houses are now falling in price and will continue to do so. Interest rates are rising and there’ll be no more government props to support sky high prices. So, just wait a bit and enjoy some better savings rates on your deposit

Twinklenoseblows · 02/12/2022 09:08

You will have to pay tax on the rent she pays at your marginal rate. So based on what you've said likely 20%.

You will also have to pay additional 3% stamp duty on the value of the property as it will be classed as your second home.

Is there any scope to extend your mortgage to get the extra money she needs and then she can give you the money to repay you? You can put a charge on the property that ranks behind the mortgage lender to secure what you lend her.

I think the problem you're having with the guarantor mortgage is that your earnings aren't high enough.

Suzi9989 · 02/12/2022 09:13

So you are going to 'rent' property to your daughter while she claims benefits. One day the property will become her inheritance paid by our government. This does not sit well with me at all. Please do not abuse the system

gonutkin · 02/12/2022 09:14

Suzi9989 · 02/12/2022 09:13

So you are going to 'rent' property to your daughter while she claims benefits. One day the property will become her inheritance paid by our government. This does not sit well with me at all. Please do not abuse the system

I don't know if you missed it but the poster previously said that her daughter works full time and pays the rent herself.. unless I've missed something

TreadSoftlyOnMyDreams · 02/12/2022 09:30

Twoshoesnewshoes · 30/11/2022 20:39

Thanks everyone, that’s helpful
to clarify, she works full time and doesn’t get any benefits.
she can pay (monthly) towards a mortgage much more than she can borrow if that makes sense, like most young people she is paying £750 a month rent which is equivalent of around £150,000 mortgage, but can only borrow around £110,000.
so if I bought the property it would actually be hers and she would pay the rent / mortgage, then remortgage to her name when she can borrow more in her own name.

It would be simpler to buy together as tenants in common and she can buy you out later

C4tastrophe · 02/12/2022 09:35

Smudgybuggerler · 02/12/2022 09:00

Houses are now falling in price and will continue to do so. Interest rates are rising and there’ll be no more government props to support sky high prices. So, just wait a bit and enjoy some better savings rates on your deposit

Agreed. She needs to sit tight for 6 months.

thenewduchessoflapland · 02/12/2022 09:48

Twoshoesnewshoes · 30/11/2022 20:39

Thanks everyone, that’s helpful
to clarify, she works full time and doesn’t get any benefits.
she can pay (monthly) towards a mortgage much more than she can borrow if that makes sense, like most young people she is paying £750 a month rent which is equivalent of around £150,000 mortgage, but can only borrow around £110,000.
so if I bought the property it would actually be hers and she would pay the rent / mortgage, then remortgage to her name when she can borrow more in her own name.

Could you not get a joint mortgage with her?

Jmaho · 02/12/2022 09:58

There are such btl mortgages around but few and far between and the problem you have is that daughter will be tenant but she is also contributing to the deposit. It's a conflict of interest
There are guarantor type mortgages around where you and partner can go on mortgage but not the deeds and it does boost affordability but if you have a hefty mortgage yourself it might not work
You need to find a good broker

BadNomad · 02/12/2022 09:58

This really isn't as straight forward as you think it is. Like others have said, you will have to pay stamp duty and pay tax on the rental income.

Stamp duty on a buy-to-let is currently 3% for properties up to £125k, then 5% for £125,001 - £250,000.

You will have to pay at least 20% tax on what your daughter pays you for rent.

Plus you'll need landlord insurance etc.

casiopeena · 02/12/2022 09:59

Can someone explain why buy to let to rent to family is rare? Is it the higher risk of not paying rent by the tenant and thus the owner defaults on the mortgage?

beachcitygirl · 02/12/2022 09:59

Could she buy a home in a cheaper (not as nice/expensive area) for her budget, rent it out & live at home. Thus earning equity & an income from the rent?

NoSquirrels · 02/12/2022 10:47

casiopeena · 02/12/2022 09:59

Can someone explain why buy to let to rent to family is rare? Is it the higher risk of not paying rent by the tenant and thus the owner defaults on the mortgage?

Precisely that. People aren’t generally keen to evict their relatives.

There are also restrictions on being able to receive housing benefit if you’re renting from a relative so that removes another safety net of the rent getting paid and thus income to the LL.