thinking ahead for a change

Flakey

Hi
wondering if the figures might stack up in our favour for once?
my daughter has gone off to Uni and we are paying her accommodation fees in Halls of residence (£5000 pa) - which seem extortionate.
Next year she will have to move into rented accommodation which we will continue to have to pay for for at least 3 years. It strikes me that it might be a good investment to buy a flat (current values in the area for a 3 bed flat are around £130,000) and rent out to her and 2 others.
We don't have a mortgage on our home which is worth around £200,000.
Could we use this as part equity/deposit for a buy-to-let mortgage or do they need the cash in the bank? - we don't have any savings worth speaking of.
Any thoughts?

Werdnal

You can re-mortgage your property and use the equity to buy the rental - no need for a BTL, but you must have a clear papertrail proving that you specifically raised the cash from the re-mortgage to cover the rental property, otherwise you cannot use the interest as an allowed expense against the tax on your rental income.

Then you need to be aware of all the legislation and obligations of becoming a landlord. Read this:

http://forums.moneysavingexpert.com/showpost.php?p=41160642&postcount=12

as even though you are renting to your daughter, you still need to comply with all the rules and regulations.

You could rent the whole property to her, and she could take the others as "lodgers", or you could rent to all 3 on a joint and several AST agreement - this makes all 3 equally responsible for the whole rent every month, so if one cannot pay, the others must cover the whole amount.

Even if she insists the other students are her friends, you must also ensure you get guarantors, and legally sign them up to a formal guarantor agreement (deed), as friends have a habit of becoming ex-friends where money is concerned, and you need to safeguard your rent regardless of any assurances your daughter gives you that they are genuine and reliable!

You must also check whether renting to 3 unrelated people in the specific area you buy would constitute an HMO - different rules and reg apply to these, and different councils have their own licensing requirements.

Above all, if buying a flat, check you can rent it out, as some leasehold properties are owner-occupier only!

Flakey

Thanks Werdnal
will have to do some homework but is sounds like it might be a possibilty - and thanks for the link.

Fire_Fox

Are you sure you would end up better off? How much would the mortgage, costs of buying and selling, service charges, ground rent, buildings insurance, income tax and maintenance be? Would you be charging a reduced rent over the summer months?

Be clear who the landlord is: if it is you don't have her fight your battles and vice versa. Be professional.

Mickygg

Also you will need to add stress into the equation, as well as a potential loss on value when you come to sell.

dimbo61

what happens if your daughter fails her course ?
Dont forget the service management charges for the flat !
Getting a BTL is a long term investment as the costs of buying and selling can make it more expensive than renting

drummer_666

might be better to get a freehold house?

if you only want to do it for when she is a student then look at it very carefully financially

julieb1987

I'd stick to paying the rent. Your daughter is very lucky...me and my friends had to use student loans and get a part-time job to afford to live. Apparently that's what adults do!

V_Chic_Chick

There was a thread on this not long ago

https://forums.moneysavingexpert.com/discussion/4242633

I remain unconvinced that it's a good idea.