A bit of advice needed please?

Cacran

We are in a position to buy a house to let. The money is in the bank and not earning much interest. We are at present non tax payers. My OH took vol. redundancy where he got a pay out and gets a pension each month. I only work a few hours a week.
My daughter is pregnant and her partner has left. she has now come beck to us to live until she gets everything sorted out. She has been livinh in rented property for a number of years.
We thought that perhaps we could help her out, but not sure of the best way.
We have a son living at home, so whatever we do would have to be fair to him too.
We are considering options.
What do we have to look at if we were to buy somewhere so that she could rent from us?
What tax would we have to pay on the rent she paid to us? As a single parent she would be entitled to some of her rent paid as she would only go back to work part time initially as working full time would incur a huge fee for childcare. She is also an open university student, doing a post graduate degree.
Her income is not great and she does not get sick pay from her employer. I am always worried that she could get behind with her rent should anything untowards happen, healthwise, now there would be the baby to consider, too.
Has anyne got any ideas ar advice for me (please!)?

BitterAndTwisted

Buying a property to rent to a family-member or friend is a potential minefield of misery and disappointment.

Buying a property to rent to a family member who is dependent on the LA funding the rent is often frowned upon and the LA could choose not to pay it altogether. There's a specific term for this arrangement but I can't for the life of me remember what it is right now. Damn!

Having all of your long-term savings in the one single investment may not be what you might need long-term as it may not be fluid enough should your circumstances change radically. Also, it would mean putting your daughter out on the street or force her to make other arrangements, perhaps at short-notice.

One option might be to fund your daughter's deposit and rent in advance to get her settled in a decent property and for her to continue to rent privately, so she will still continue to qualify for HB/LHA should she need to.

Fire_Fox

Cacran wrote: »

We are in a position to buy a house to let. The money is in the bank and not earning much interest. We are at present non tax payers. My OH took vol. redundancy where he got a pay out and gets a pension each month. I only work a few hours a week.
My daughter is pregnant and her partner has left. she has now come beck to us to live until she gets everything sorted out. She has been livinh in rented property for a number of years.
We thought that perhaps we could help her out, but not sure of the best way.
We have a son living at home, so whatever we do would have to be fair to him too.
We are considering options.
What do we have to look at if we were to buy somewhere so that she could rent from us?
What tax would we have to pay on the rent she paid to us? As a single parent she would be entitled to some of her rent paid as she would only go back to work part time initially as working full time would incur a huge fee for childcare. She is also an open university student, doing a post graduate degree.
Her income is not great and she does not get sick pay from her employer. I am always worried that she could get behind with her rent should anything untowards happen, healthwise, now there would be the baby to consider, too.
Has anyne got any ideas ar advice for me (please!)?

Not if the council deem your house purchase to be a 'contrived tenancy'. You would need to be able to demonstrate that this is a commercial venture and be willing to evict your daughter if she fell behind with the rent, I suspect this is not the case.

BitterAndTwisted

Fire_Fox wrote: »

Not if the council deem your house purchase to be a 'contrived tenancy'. You would need to be able to demonstrate that this is a commercial venture and be willing to evict your daughter if she fell behind with the rent, I suspect this is not the case.

CONTRIVED tenancy! Thanks Fire Fox, I went completely blank there. It must be old age.

OP, if you are seriously considering going ahead with this plan I suggest you seek the advice of a tax-accountant to clarify what taxes will become due. I believe there will be a Capital Gains Tax liability as it won't be your primary residence, although certain expenses can be offset against any rental income.

Cacran

Mmmmm, thanks for that. I think we will re think this idea. I thought there must be a snag somewhere along the line. Never mind, back to the drawing board!