Lodger or tenant or something else?

smartpicture

firsttimetom wrote: »

That sounds like it will cause no end of resentment

You will get £10 a month (which won't cover the mortgage, so you'll be a lot worse off).
Your Daughters Girlfriend will be £500 a month worse off
Your Daughter will (in effect) be £1000 a month better off as she will pay no rent and receive £500 a month from her partner.

This scenario will end in tears there is no doubt about it.

What does your Daughters Girlfriend do for a living and how much does she work? Can your Daughter find a better paid job (I know there isn't much out there, my G/F applied for well over 200 jobs before securing one!) or find more hours - i assume she has a part time job if she isn't paying tax?

Also what would happen if they were to split up. Could you afford the house without the girlfriends income?

I honestly think people should rent a place together before they make a leap of faith and buy, as you really never know how well you will live with a person until you actually do it and you stand to lose a lot less if you rent and break up than buy.

Maybe they could look in a 'less desirable area', or a little one bed, or even a Studio apartment just for the time being.

Both my daughter and her girlfriend have just finished their degrees and are doing a masters this year. My daughter does some paid work at McDonalds - she has worked there every weekend and holiday since she was 15, but cut down her paid hours to work as an unpaid intern to get experience in a relevant field for the last year. She funded herself through the first 2 years of her degree in London, renting with friends, then when she started to struggle I paid her rent for the last year. For the masters, the only money she gets is a career development loan to pay the fees so I planned to continue paying her rent and give her £500pm on top anyway.

So - I won't be any worse off, as the money I would have paid in rent plus the rental from the girlfriend will cover the costs and it can be a long-term investment for future student lets. The girlfriend won't be worse off, as she'll be paying the £500 she was already planning to pay in rent, but will benefit from living in a flat that would actually cost a bit more than that to rent and have a decent landlord. She has a well-paid part-time job as well as parental contribution.
My daughter will be in the same financial position whether she rents or I buy. She was happy with a one-bed flat (which is what they were looking to rent, before they discovered how hard it was to get anywhere this year), but I preferred a 2-bed as a better long-term investment. I can afford it with or without the girlfriend's contribution as I recently sold my own business and the money would otherwise be sat in an account earning peanuts. I'm not giving them the house, so if they split up, it should be relatively easy to disentangle. Does that address the concerns?

But I do see your point that it might cause resentments if the girlfriend is literally handing over money to my daughter every month.

smartpicture

N79 wrote: »

1. As mayfair has said, while ASTs don't have to be at full market rent they have to be above a certain level - mayfair provides the link.

2. Not tax efficient is a relative of term, of course, but as proposed lodger income is above personal allowance so tax will need to be paid. As expenses will occur to someone else (father?) there is no possibility to offset to reduce the tax bill. Also, if property was in daughter's name then capital gains can be avoided - and some other mechanism used to protect the parent's interest. All would depend on how the property is financed.

So I've looked at may_fair's link and it seems so long as I charge her at least £1000pa then it should be ok (as they're in London), and I'll have to check the ratable value.

Re the tax efficiency - I have another small house in Wales which is rented out, am I able to pool the income and expenses from the two properties or is each property looked at in isolation?

I'd prefer not to put the house in my daughter's name, even if would save money - they will just be living there temporarily for a year then they'll have to make their own way in the world.

00ec25

smartpicture wrote: »

Re the tax efficiency - I have another small house in Wales which is rented out, am I able to pool the income and expenses from the two properties or is each property looked at in isolation?.

all income and expenses from property letting is pooled and treated as a single business for tax purposes.

However, what I am not sure of is whether you will be able to make a claim for the daughters rental since (although she is of course no longer a dependent relative) she is not paying a market rent and therefore it could be held by HMRC that the loss is artifically inflated to benefit the tax posiiton against your other property.

Svenena

I assume you want the £500 the girlfriend will be paying to your daughter to actually end up with you. How would this work? Could it not be seen as a bit dodgy if it is ostensibly going to the daughter (tax-free) but actually then being handed to the mother? (I don't know whether there would be a problem with this, just posing the question in case!).

seven-day-weekend

I have until very recently had a similar set up to this , with one or two notable differences.

The house where my son lives with his girlfriend and a male friend does not have a mortgage. It is owned outright by my husband and myself.

I charge the girlfriend and other occupant rent which is paid to me and is INCLUSIVE of most of the bills. Therefore this is all they have to pay. It comes to less than £500 a month for both of them (but it is not in London).

I have not charged my son rent because initially he was out of work, or only on a contract of very few hours. He has always paid the remaining bill (house phone and internet) that is not inclusive in the other peoples' rent. He now has a decent job and I was going to start charging him rent.

.... however, this set-up is now due to change drastically, but has worked well for several years.

I have declared all rents to the tax office.

Darlyd

Can you not tell your DD that she needs to stand on her own feet and get more work, and you are charging £500 a mnth between them? As a joint tenancy? That would be fair, her GF will probably feel a little peeved? Could they also rent out the other room to a lodger to raise some funds?