Loan to daughter's compny

Roysee

Hi there

My daughter and son in law have recently set up a buy to let limited company. The company has had an offer on a property accepted. I propose to provide her with a loan for a large part of the deposit. She has been advised that providing such a loan to the company would be looked at unfavourably by a mortgage provider. Can anybody throw some light on this and if this is so what other way of providing the money would not cause any issues. I would prepare a formal loan agreement stating the terms of the loan and interest rate.

Pixie5740

Roysee wrote: »

Hi there

My daughter and son in law have recently set up a buy to let limited company. The company has had an offer on a property accepted. I propose to provide her with a loan for a large part of the deposit. She has been advised that providing such a loan to the company would be looked at unfavourably by a mortgage provider. Can anybody throw some light on this and if this is so what other way of providing the money would not cause any issues. I would prepare a formal loan agreement stating the terms of the loan and interest rate.

Who advised your daughter this? A mortgage broker?

Do your daughter and son in law have any skin in the game or are they proposing to borrow 100% of the purchase price?

forgotmyname

Can they afford to pay your loan and the mortgage if they have no tennant in the property?

foxy-stoat

Just gift the money to them - at least you all know where you stand at the start. If they decide to pay you back then happy days.

System

Unless you can afford to lose the money don't get involved. It is a business and if they'd have done any kind of business plan they'd have known they'd need money to get going and sorted out funding. It isn't your daughter who needs the money it is the Ltd Company which is a separate legal entity. Sounds like they don't know their arris from their elbow when it comes to having a business if they haven't already got the funding in place for something they knew they'd have to have so you want to be well out of it.

foxy-stoat

Business plan you say? I doubt one was done as normal yield on BTL is mid single figures. Hardly a corker of a money making business.

System

foxy-stoat wrote: »

Business plan you say? I doubt one was done as normal yield on BTL is mid single figures. Hardly a corker of a money making business.

Indeed. I sold out when it got to the point you could beat the returns with regular saver accounts without having any of the grief. Money is now sat in a S&S ISA which has returned way more than the yield. Property around here has been basically flat for price gains since the crash so no making money via that route like you could do in London.

BBC News recently had an article about how many landlords are getting out of the rental market. I suspect the OP's daughter has read something in the news recently about rents rocketing and thought it was a good idea for some easy money. If they think renting out property is easy money they're in for one hell of a wake up call. To sell the house after my last tenant moved out, or even to be able to rent it again, it cost me £10k to refurbish it with much of that being due to what they'd done to the place.

BrassicWoman

buy a share of the company. let them buy you out when they have the cash.

buythedip

What proportion and how much of the deposit?

How much capital are they putting in in total? Have they already got properties or is this their first? If so, I!!!8217;m going to become a premier league footballer tomorrow

Willing2Learn

BrassicWoman wrote: »

buy a share of the company. let them buy you out when they have the cash.

This is my favourite idea so far...It's like something out of Dragon's Den lol ...But a seriously good idea though...

DCFC79

Are you sure you want to mix finance and family ?
It rarely ends well when it goes belly up.

Id avoid it if it were me.