Can I buy a house to rent to my lil sis on housing benefit?

scarletjim

I've searched several previous threads but none quite cover my question...

My sis has a hubbie and 5 kids, and currently lives in a 2 bedroom house (!) paid for entirely by housing benefit, about £400. Obviously that's much too small, so they have told her this week to look for a 4-bedroom place up to £900pcm.

Meanwhile I've been thinking recently of buying a place to let if I can make it worthwhile, and I've got about £140k cash to do this. Could I buy the place she wants for about £180k, remortgage £40k on my own flat (fully owned) to provide the extra cash, rent it to her, and get the £900 or thereabouts from the council?

I am aware that the deal cannot be contrvied nor non-commercial - well if she couldn't pay the rent I would have to evict her and get some other tenants in, so it is commercial, and £900 pcm is not too far off the going rate for such a place (it's probably nearer £1000pcm, but I'm happy to get a bit less if it helps out my sis, plsu I'd save on agents fees and have tenants I know and trust). In terms of being contrived, why do they have this stipulation? If I'm charging roughly the going rate, and no one is getting ripped off, what's the problem? Is there any way round this problem?

If my plan is not allowed, then a simple question - why on earth not? Who would be harmed by what I'm suggesting?

Any other advice on the subject would be greatly appreciated. I don't want to rip anyone off, I just want to a). help out my sis and b). make a reasonable return on my money (I don't mind if its slightly less than I coudl achieve by other means).

PS Why can't my sis just rent from someone else? Well, she wants a landlord she knows, who will get repairs done, she wants someone who is confident that they will let her live there for the next 20 years etc etc

passatrider

The short answer is No. If you are related to the tenant then they cannott claim housing benefit.

sunnyone

scarletjim wrote: »

I've searched several previous threads but none quite cover my question...

My sis has a hubbie and 5 kids, and currently lives in a 2 bedroom house (!) paid for entirely by housing benefit, about £400. Obviously that's much too small, so they have told her this week to look for a 4-bedroom place up to £900pcm.

Meanwhile I've been thinking recently of buying a place to let if I can make it worthwhile, and I've got about £140k cash to do this. Could I buy the place she wants for about £180k, remortgage £40k on my own flat (fully owned) to provide the extra cash, rent it to her, and get the £900 or thereabouts from the council?

I am aware that the deal cannot be contrvied nor non-commercial - well if she couldn't pay the rent I would have to evict her and get some other tenants in, so it is commercial, and £900 pcm is not too far off the going rate for such a place (it's probably nearer £1000pcm, but I'm happy to get a bit less if it helps out my sis, plsu I'd save on agents fees and have tenants I know and trust). In terms of being contrived, why do they have this stipulation? If I'm charging roughly the going rate, and no one is getting ripped off, what's the problem? Is there any way round this problem?

If my plan is not allowed, then a simple question - why on earth not? Who would be harmed by what I'm suggesting?

Any other advice on the subject would be greatly appreciated. I don't want to rip anyone off, I just want to a). help out my sis and b). make a reasonable return on my money (I don't mind if its slightly less than I coudl achieve by other means).

PS Why can't my sis just rent from someone else? Well, she wants a landlord she knows, who will get repairs done, she wants someone who is confident that they will let her live there for the next 20 years etc etc

How is it not contrived when you are asking for less rent because she is your sister and you bought the house especailly for her?

sunnyone

scarletjim

passatrider wrote: »

If you are related to the tenant then they cannott claim housing benefit.

That's contradictory to all the previous threads on this issue. They say there are circumstances where it is possible.

scarletjim

sunnyone wrote: »

How is it not contrived when you are asking for less rent because she is your sister and you bought the house especailly for her?

sunnyone

Er, where have I said it's not contrived? It clearly is, therefore I am asking:

a). Why do they have this stipulation, who am I hurting by doing this?
b). Is there anyway way around it or anything I can do to keep the council happy, eg. what about if I rent to someone else for 6 months first etc?
c). Does anyone else have any other advice or suggested alternative courses of action?

passatrider

scarletjim wrote: »

That's contradictory to all the previous threads on this issue. They say there are circumstances where it is possible.

I'm just going on my experience with housing benefit. If you know any different then why are you asking the question?

Oldernotwiser

I think that you can do this if you have a proper tenancy agreement and charge the market rent.

What would you do if your sister didn't pay the rent?

How is she ever going to be able to pay this level of rent when they come off benefits?

Howard85

Your tenant may be treated as not liable for rent and therefore not entitled to Housing Benefit if:

• they are closely related and reside with their landlord, or
• their landlord is also their employer, or
• the tenancy was created solely to take advantage of the Housing Benefit Scheme, or
• the tenancy is not on a commercial basis, or
• residing in that property is a condition of their employment.
• The landlord, or agent, does not have the right to grant occupation.

Please note: this list is not exhaustive, so landlords must not assume that Housing Benefit will be paid automatically.



So, I guess it's whether they consider the tenancy has been created solely to take advantage of Housing Benefit. I suppose the relevant question is, would you be going ahead with a buy-to-let even if the tenant wasn't going to be your sister.. but how that is meant to be proven either way, who knows..

scarletjim

passatrider wrote: »

I'm just going on my experience with housing benefit. If you know any different then why are you asking the question?

I'm asking the question because the other threads are confusing and don't answer my specific questions / circumstances. However they do confirm that there are instances where tenants renting from relatives can legitimately get housing benefit.

scarletjim

Oldernotwiser / Howard85, to provide further info on your questions:

1. If my sister could not or did not pay the rent, I woudl have no choice but to evict her and get some new tenants. That capital is my only savings, I cannot afford to let it sit not earning any interest / income therefore in real terms being eroded over time.

2. Her husband has medical issues that prevent him from working, and my sis can't work with 5 kids, most of whom are still quite young. I can't see them ever coming off benefits, certainly not in the next 10 years anyway, at which point we could reassess.

3. I have no idea how to prove this, but I would go ahead with a BTL irrespective of my sis, I have been looking to do so for the last 12 months or so, proving it would be tough, all I have is a). internet history over the last year :rotfl: and b). the fact that not many people would just sit on that amount of money in current accounts without locking it away to gain a higher rate of interest.

It's so frustrating because I can't see how what I'm proposing would do any harm to anyone.

oldMcDonald

scarletjim wrote: »

That's contradictory to all the previous threads on this issue. They say there are circumstances where it is possible.

I'm pretty sure you can.

You need to have a AST in place, but it isn't any different from renting it out to anyone else. We rented a house from my husbands mum for 4 years and claimed HB for some of that time.