Considering buying a property for DS1 to live in

[Flowerypillow]

DS 1 is looking for a place to rent. He can afford the rent but the amount of money makes me shudder.

I have some money that I really should invest somewhere. Enough to pay about half on a small flat in a nice ish area. I'd have to take a mortgage for the rest. The mortgage on my own house is paid up.

I am considering buying a flat which I would rent to him for the cost of the mortgage plus maintenance charge, which would be considerably less than the market rent.

Concerns:

• what if he turns out to be a terrible tenant?

• His GF would likely live there too - how will it feel for her to be living in a house "MIL" owns?
• I have another son who currently doesn't need this help but may do on the future and if you do it for one...

I do genuinely need to put my money somewhere and it seems to solve a problem, but I wonder if it's better to treat the two things separately and let DS pay market rent, even though I could save him a fair amount per month? Let him stand on his own so to speak.

I think I'd be a decent landlord, which isn't guaranteed elsewhere, but I wouldn't like it if he doesn't respect the property. I don't think he'd wreck it but he might not take as much care as I would!

Do you know the children or just the parents? Your colleagues are hardly likely to admit that their kids resent them doing this are they!

Or the children may just not say anything but come home less, be closer to friends/partners family etc.

I thought about this and asked about it in the finance section a while back. Roundly told it was a fucking terrible idea, but still don't really understand why

Can you charge them slightly below market rent but save some of the surplus to gift them later towards a deposit?

You will be liable for tax. You can only offset expenses such as maintenance, boiler servicing etc. The mortgage is not an allowable expense so you will be liable for tax at whatever rate you pay on the rent less maintenance expenses.

@Postapocalypticcowgirl i'm close enough to my colleagues and we openly discuss finances on a regular basis that if the children were resentful they most likely would mention it.
this being said the families that were able to afford buying second homes in uni cities were and remain well off.

right now my trio are late 30's early 40's as are the adult children of my colleagues maybe something will be said upon the passing of their parents and the final division of assets but who knows how much water flows under that bridge over a lifetime.
i honestly believe most well rounded young adults understand how different needs between siblings means different approaches.

Mortgage interest is an allowable expense.

Lovely idea and definitely think you should get proper legal advice though.

It’s a very kind idea. But involve your son in the plans because ideally you want somewhere he can remain for some time as beyond that you will need to either rent to someone else or sell

as for the gf, this would be a good deal for her I imagine. Certainly preferable to actually living with inlaws which I imagine a lot of young couples do.

... Or she (if she happens of course) could live with her own parents, or in her own little rental, or in the dorms, or in a house-share - all of which would protect her more from unexpected homelessness than a situation that includes young love and hot heads.

Living with a man, in his property and paying rent or not - has always ended badly for me. ALWAYS.

It's such an awful dynamic that I'd have to impose a "no one staying longer than two nights rule". But that's as awkward as anything! It's a minefield, so I wouldn't go down this particular route at all, rather help out with a buying deposit when needed and be a rent-guarantor if needed.

I have a similar arrangement. I bought a property which my son rents from me at a below market rate. This happened at a time when he had moved to a different part of the country and was struggling to find a rental property and I was planning to buy a rental property for income, so it was good timing.

His girlfriend lives there with him and we have a proper tenancy agreement with my son as the lead tenant.

Pros for me: tenant I trust, who is patient regarding repairs and improvements that I can take more time to complete. The long term plan is to get the place in good shape (gradually!) then either sell it to my son, who will have had chance to save a reasonable deposit or he moves on and I can charge market rates in a town where such properties are in high demand.

I declare and pay tax on the rental income, but I was fortunate to buy without a mortgage.

Your worries about him not looking after it….raises alarm bells for me. If you rent to anyone, you need to step back and let them live as they choose. Otherwise, this isn’t suitable for you.

I agree that you should consider if your main aim is an investment for yourself or help for DS.

Make sure you fully know all the costs involved in buying and also in running the property and those involved in selling and tax implications. It might not look such a good investment.

You could consider if it would help your DS to charge him rent, but to then save it and return it to him later. Otherwise, is there a chance he will just spend more cash and essentially be no better off long term?

I’d agree that gifting a deposit or money towards a deposit at the right time might be better.

You could still do this via a BTL hat you let on the open market and save some of the income for DS and/or hold some of the capital back for this purpose too.

Is it right now he needs help or is it that you want to help him get on property ladder at right time?

If he wants to live with GF, the fact there are 2 of them and they can live in a 1-bed means renting us more affordable per head than for many. The best help is probably with a deposit when the time is right for him to buy.

@Flowerypillow Mortgage interest was an allowable expense. It hasn’t been for a good few years. You have to pay base rate tax on it now, regardless of your tax band, so you pay 20% as I mentioned in my previous post.

The .gov site would suggest otherwise?

www.gov.uk/guidance/income-tax-when-you-rent-out-a-property-working-out-your-rental-income#allow-expense

@Goldplatedbag It literally says what I just said:

“Changes to tax relief for residential property
From 6 April 2020 Income Tax relief on all residential property finance costs is restricted to the basic rate of income tax.”