Newbies buying house to let (to daughter) all comments gratefully received.

starlights

I have realised after reading a countless number of threads on this board that we really haven't a clue what we are doing and would be grateful of any advice on pitfalls or if anyone could point out obvious things we have omitted. Thank you.

We have had some money sitting in our bank for several years after paying off our mortgage on the house we live in. We have toyed with the idea of buying a property to let but have been put off by hearing stories of damage and non payment. But we are currently in a position where we could afford to buy a cheap property and probably get £400 rent per month.
Our daughter is living in a housing association house in a pretty bad crime area (inc drugs, shooting). She lives with her young son and works part time and is entitled to some housing allowance.
We have now decided that we would like to buy a property to rent and she would be our 1st choice tennant. here our problems start.

If renting to her we would choose a different type of property and need to take out a mortgage (10 year) the mortgage would not be covered by the rent (but that's not a huge problem at the moment)
Although she would be still entitled to housing allowance when renting from a private landlord it is possible she would not be able to if renting from us. If she wasn't able to rent it then we would go back to plan a and get cheaper property without mortgage.
Does anyone have any experience of a contrived tenancy tribunal and is it possible to agree to this rental before purchasing property?

She would be moving in with her own furniture should we do rental on 6 month ast even though it would probably be 5 year rental?

I know as landlords we have to have annual gas check are there any other annual checks that need to be undertaken?

I have taken up a lot of room already but hopefully you get some idea of what we want to achieve and as well as answers to questions I would be grateful to hear of any other comments or experiences.

Thank you

clutton_2

since the mortgage will not be covered by the rent your first port of call is to talk to a good "whole market" broker to see if you can get a mortgage at all...

BTL mortgages always want a minimum of 125% rent when compared to the mortgage payments... why would a lender lend on a "Loss-making investment" ?

starlights

We will be mortgaging against existing property

ericonabike

I'm in a similar position, but son is working and we therefore want to charge him a lower-than-market rent. This no way covers the mortgage we would be taking out on our own property, but we can afford the repayments ourselves. We intend using him as a 'guinea pig' tenant, doing everything by the book, against the day he moves out and we do it for real. Try the Registered Landlord Association site for guides on what landlord responsibilities entail. I couldn't comment on the Housing Benefit/contrived tenancy element, other than to say it seems reasonable to pay rent, even to a close relative. You might want to try a welfare rights adviser at your council for that.

Fire_Fox

starlights wrote: »

Our daughter is living in a housing association house in a pretty bad crime area (inc drugs, shooting). She lives with her young son and works part time and is entitled to some housing allowance.
We have now decided that we would like to buy a property to rent and she would be our 1st choice tennant. here our problems start.

If renting to her we would choose a different type of property and need to take out a mortgage (10 year) the mortgage would not be covered by the rent (but that's not a huge problem at the moment)
Although she would be still entitled to housing allowance when renting from a private landlord it is possible she would not be able to if renting from us. If she wasn't able to rent it then we would go back to plan a and get cheaper property without mortgage.
Does anyone have any experience of a contrived tenancy tribunal and is it possible to agree to this rental before purchasing property?

I don't see how you can truthfully say this is a commercial tenancy when you admit you would purchase a different type of property for your daughter! Would you hesitate to evict your daughter if she did not pay the rent for any reason, given that you will have a mortgage to pay? You also say you the mortgage would not be covered by the rent, would you still be happy to do that for a tenant other than your daughter? If not you are arguably subsidising her and, again, this is not a commercial tenancy.

starlights

Ericonabike, thank you
Fire fox, you are right I think it would be extremely hard to evict your own daughter, we have thought long and hard about this and decided that if she were in another property and got into difficulties then we would try our best to help her out and so would have to do the same here. There is an understanding though that this is not indefinite and she would obviously have to budget in order to pay back money owed and that the rent should be her number one priority. So far though this has not been a problem for her as she has been renting for nearly 4 years without any problem.
Strangely I have been out looking at properties to rent just now and the going rate for a similar property is about the current mortgage repayment but of course when rate goes up we would be out of pocket, Yes I would continue to rent out at a lower rate, not commercially viable but after 10 years we would own the property and hopefully have made a little money on it so making up for any rent losses. (assuming tennants pay and don't wreck the place)

Fire_Fox

starlights wrote: »

Fire fox, you are right I think it would be extremely hard to evict your own daughter, we have thought long and hard about this and decided that if she were in another property and got into difficulties then we would try our best to help her out and so would have to do the same here. There is an understanding though that this is not indefinite and she would obviously have to budget in order to pay back money owed and that the rent should be her number one priority. So far though this has not been a problem for her as she has been renting for nearly 4 years without any problem.

If she were in another property you would not be 'benefiting' from the council paying your mortgage, you would simply be helping your daughter out. Would you be happy to let to an LHA tenant who was not your daughter? I don't doubt your daughter would not wish to default on her rent, but all you need is one jealous neighbour to report her for benefit fraud and an investigation starts ...

I completely understand why you want to do this, but without lying to the council I do not see how you can claim this would be a commercial tenancy. I also think you are wide open to being deemed contrived - you are ONLY intending to taking out a mortgage on the BTL if you are letting to your daughter who is on LHA.

VIGILANT22

starlights

You need to understand the tax implications of this...naive to think you can have a house paid for in 10 years of out of Housing Benefit!....

RAS

You need to know what the Local Housing Allowance is for your area. That is the maximum that your daughter will be allowed to claim for herself and a child.

You then HAVE to charge your daughter the full market rent in order to avoid a contrived tenancy.

If the full market rent can be covered by the LHA, you are home and dry.

otherwise....

starlights

Fire_Fox wrote: »

If she were in another property you would not be 'benefiting' from the council paying your mortgage, you would simply be helping your daughter out.
I understand what you are saying here but we really have no intention of the council paying our mortgage, well no I guess that's not true as I suppose they would be but if she does not move into a house owned by us she would move into another property (hopefully) and that landlord would benefit from the local council paying that mortgage
Would you be happy to let to an LHA tenant who was not your daughter?
I would like to answer yes to this question after seeing what a problem it is to find a decent property that would be available to LHA tenants. Here though is my biggest fear, finding a tenant LHA or not that I could trust this is what has put us off doing this in the past
I don't doubt your daughter would not wish to default on her rent, but all you need is one jealous neighbour to report her for benefit fraud and an investigation starts ...
I really want to do all this legally and above board so that no one is comitting any benefit fraud.

I completely understand why you want to do this, but without lying to the council I do not see how you can claim this would be a commercial tenancy. I also think you are wide open to being deemed contrived - you are ONLY intending to taking out a mortgage on the BTL if you are letting to your daughter who is on LHA.
I don't want to lie to the council at all. When I say we would buy outright I mean we would buy a cheaper property, ptobably similar to the area she is in at the moment But because of our grandson we would want her to be in a house with a garden and near a school as she doesn't drive, we will still be putting all our savings into the house which will pay for abour two thirds but would need to take out a mortgage for the remaining third, We do not plan for the council to pay for the whole house whilst we keep our savings and go swanning off on a world cruise. (Some hope)

I can't do quotes like you can my answers are mixed up in the above quote. Sorry

starlights

VIGILANT22 wrote: »

starlights

You need to understand the tax implications of this...naive to think you can have a house paid for in 10 years of out of Housing Benefit!....

Sorry my answer I think lies in above post, we will be putting down 2/3 deposit and getting mortgage for 1/3