Bank of Mum...

[Itsrainingatlast]

I appreciate that I am in a fortunate financial position in posting this.
I own my house mortgage free.
My eldest son is in his 2nd year at Uni. He has about £30k in his junior trust fund (I put in £100 every month until he was 18), and about another £10k that he has saved (he also works and is very much a saver). He lives at home as he attends a local Uni and the student life is not really for him.
I am contemplating helping him to buy a flat. I would act as guarantor and would pay the mortgage and rent the flat out for the next two years until he graduates (he's doing a 4 year degree but I think might do PG study as well), and is able to cover the mortgage himself, although the flat would be entirely in his name.
Is this a ridiculous idea, or an effective way of getting my son onto the property ladder? My younger son is 4 years younger, and I would hopefully be in a position to do the same for him when he is a similar age.

Would it be his £40k? Or are you contributing more?

I'd wait until he has finished uni and got a job before getting him onto the property ladder, then, by all means help out as much as you can.

What does he want to do?

Property as an investment isn’t always a good investment…depends on yield, return of interest/equity vrs what the money is currently invested in.

My youngest is very different - I am fairly certain he will want to spend his trust fund travelling, which is why I said 'hopefully'. Financially I treat them exactly the same!
Whereas the oldest is quite keen on property and investments - but I don't know a huge amount about property as BTL and was just looking for some insights if we were to pursue this. He would be 100% up for this.

I've not read the full thread but as a Conveyancer, the majority of my current Clients are landlords selling up due to the Renters Right Bill, proposed EPC changes and tax changes. If I was buying a property to rent out now, it would be a new build house (and therefore up to the proposed rental EPC standard) and certainly not a flat with service charges and Building Safety Act hanging over it.

No, he lives at home at the moment. He goes to a Uni he travels to on a daily basis.

So you’d buy the property with the aim he moves in it post uni?

Rentals are not generally a good investment at the moment given the lack of tax relief/costs and potential legal pitfalls. Renters Roghts bill is coming in too. House prices are not rising dramatically either. He’d be better off having a good savings/stocks and shares portfolio.

You can't just look at this from a financial point of view - it's much more complex than that. He could feel beholden to stay in your area... you wouldn't want to feel you had trapped him in any way, would you?

In terms of not leaving the area, you say that's not his personality but for all you know he could meet a new love interest tomorrow and want to move to be with them. So don't trim his wings by buying something that he has any type of responsibility for.

I think you should just invest the money, not tie it to bricks and mortar when he's so young and is just starting out in the world. Have you asked him by the way? What does he say about it? How does he think/feel about it?

Thanks @PomPomSugar this is helpful.
I'd be looking at somewhere that might not be brand new, but likely built within the last 5-10 years.
I think this is really the question - is letting (in the short term) worth it, or are there better ways to maximise his savings and help him for the future.

This

You are planning on investing more than his £40k?

Thank you @Florencesndzebedee
It's currently in a stocks and shares managed fund.
I think we might leave it there for now!

Phew!

Still a lot of hardwork being a landlord.

I have used a LISA to save for DCs and help with deposits. I do think you need to give him some time to consider where he would like to be based/live before he buys. Also, in some areas there are signs of prices starting to fall, so with my DCs I am a little cautious. Certainly I would be buying over the coming couple of years, but not necessarily until things are a bit more settled and until DCs know what they want and where they want it.

Property isn’t a good investment anymore. We bought in 2017, sold in 2024, central London, beautiful 2 bed with outside space opposite a park and 7 min walk from a Z1 station.

We lost £75k.

Invest the money in high interest bonds and lock it away for a few years. I make nearly as much money doing that as if I rented out properties bought with cash, let alone a BTL mortgage. He will have a good basis for a deposit on his own place if the interest is left to accrue. The problem with flat renting is that you (or he) becomes a landlord, and then have to comply with the new renters reform act and all sorts of existing legislation to protect tenants like gas checks etc. You have to ask yourself if it is all worth the effort when you are just trying to secure an investment return for your child. You may end up with a tenant who gets into rent arrears or damages the property, and it is a hassle to keep up with the maintenance. It takes ages to get a bad tenant out in the courts these days. He may change his career ambitions in a few years prompting a move away, or want to buy with future partner etc. Having to sell a flat (on an ever decreasing lease) is a complication I wouldn't entertain if there is little prospect of him living in it later in life.

Where is this "cheap as chips" places please?

Would you be renting it out because he’s not ready to move out yet? Or because you’d need the rent to service the mortgage whilst he’s only earning from a PT job?

If the latter, that’s extremely risky and could leave him worse off than having his money invested in funds. If the former, he’s also not ready to be a landlord.

Yes - you bought in an overpriced market, after the period of very high price growth, and didn’t keep it that long (in the grand scheme of things).

I know a lot of people who bought flats around that time who have lost money.

Yes easy to see in hindsight - at the time everyone was saying prices would continue to go up so to buy in London as soon as you could.

Im just saying that property isn’t a guaranteed profit especially if her son may want to move within 10 years - which is likely at his age - so not to gamble.

Arse end of no where in a deprived area way up north

Is your son planning on buying where he is at University? Is he planning on getting lodgers?
A friend of one of my children had their house bought for them while they were at Uni and they took on 2 lodgers. The dynamics in the house did not work well with 1 owner and 2 lodgers. It isn’t the typical uni living experience.

Whoever is on the mortgage needs to be on the deeds as the owner. The lender will need to know that the borrower does actually own the property that is the collateral for the loan.