Buying house for student daughter to live in, then renting it out?

pinkzebra

So we are homeowners, and are currently mortgage free. We have always thought about buying another property, and renting it out - giving us some kind of income when we are older.
We have a daughter, who is a student. It seems sort of logical to buy a property near the university, let her and her partner live in it for a couple of years (partner would pay us some rent, and they would jointly pay bills), then continue to rent it out to others after. 

I’m just wondering what the best way to go about it would be? We have enough funds, but they are tied up in our company and some is inheritance that we are waiting to come through (currently selling the property - jointly owned by my husband and SIL). We are thinking about a mortgage seeing as the interest rates are low at the moment. One that we can pay off early once we can. I think, if I understand right - we can’t get a BTL mortgage, as our daughter will be living there. Or can we get one if she doesn’t actually pay us rent, and just her partner does? Or would it just be easier to try and get a mortgage on our current home, and use that to buy the other house?

Also, this would be in our names, not our daughter’s. 

Any advice would be appreciated. We are thinking about buying something like a 2 bed cottage, rather than a typical student house. Something with potential, that we could either renovate or extend in the future. 

Any advice welcome. Thank you

in_my_wellies

I did something similar for two of my children but I insisted they lived in halls of residence for the first year so as to properly meet and make friends with other students. As my daughter left my son moved in. If he had chosen a different uni I figured rental income would pay towards his rent elsewhere.  
The house is in my name to preserve their first time buyer status.
They didn't pay me rent but did pay their bills. 
Everything else was the same as a normal rental property 
If the partner is not a student then council tax would need to be paid

[Deleted User]

pinkzebra said:

So we are homeowners, and are currently mortgage free. We have always thought about buying another property, and renting it out - giving us some kind of income when we are older.
We have a daughter, who is a student. It seems sort of logical to buy a property near the university, let her and her partner live in it for a couple of years (partner would pay us some rent, and they would jointly pay bills), then continue to rent it out to others after. 

I’m just wondering what the best way to go about it would be? We have enough funds, but they are tied up in our company and some is inheritance that we are waiting to come through (currently selling the property - jointly owned by my husband and SIL). We are thinking about a mortgage seeing as the interest rates are low at the moment. One that we can pay off early once we can. I think, if I understand right - we can’t get a BTL mortgage, as our daughter will be living there. Or can we get one if she doesn’t actually pay us rent, and just her partner does? Or would it just be easier to try and get a mortgage on our current home, and use that to buy the other house?

Also, this would be in our names, not our daughter’s. 

Any advice would be appreciated. We are thinking about buying something like a 2 bed cottage, rather than a typical student house. Something with potential, that we could either renovate or extend in the future. 

Any advice welcome. Thank you

I’m not sure I’d agree to this if I were the partner. Then again if he’s the only one paying rent he’d be the tenant and your daughter just his bidey-in so if the relationship goes south he could boot her out. 

If letting to family the it’s regulated BTL mortgages you need to look at alternatively a second home mortgage might work but charging the partner rent might make that tricky. Remortgaging your home to purchase the second property in cash might be a viable option. Really you need to see a mortgage broker to discuss your options. 

You’ll need to factor in the higher rate of SDLT and you will need to comply with all the necessary housing legislation if you’re going to be charging the partner rent. The rent paid will be subject to income tax. 

I agree with @in_my_wellies about halls of residence for the first year to properly meet and make friends with other students which is something those living off campus can miss out on. 

macman

If the house is owned by you and the mortgage in your name, then both your daughter and her partner would be tenants, with all that entails. And you would need a BTL mortgage.
You can't just buy it yourself with a residential mortgage and let your daughter live in it, because that's a breach of your mortgage agreement: lenders will not allow this, because in the event of a default it may be very hard for them to gain vacant possession to sell the property. 

lika_86

Unless you have a burning desire to be a landlord to students, it may be easier to just give your daughter the money for rent for the few years she'll be at university (unless she's doing medicine).

JIL

How would you raise the money? By remortgaging your current property or a mortgage on the new one?
I think it's a good idea in principle. My son was at university with someone whose father bought him a property. He went on to do a PhD. After a four year course. The son rented out three rooms, for seven years. The dad didnt give him any other support as he didnt need it.  The son also did a few home improvements throughout his time in the house and sold it on for a big profit. 
Not saying everyone is that fortunate but it worked out well for them.

pinkzebra

Thanks for your responses. In response...
My daughter is currently in her first year in halls. Partner is also a student, so no council tax. 

I think we will have to see a mortgage broker - it seems a bit more complicated than I imagined! When I first lived with my partner (now husband) he had a mortgage, and I just moved in and gave him some money towards the bills. No idea this went against mortgage rules! Or maybe it didn’t, as I just paid the bills, and no rent?! Would it be possible to get a mortgage (not btl) and not charge either my daughter or her partner rent, and just for them both to pay the bills? Is that allowed? Obviously whatever we do, there would have to be a contact between us. 

lika86 - We dont have a burning desire to be a landlord to students, but do want to be landlords, so we have a better income when we get older. We are currently paying nearly £7000 a year for my daughters accommodation- which is why we are thinking about doing this next year. It just feels like we’re throwing our money down the drain. 

AnotherJoe

There are better, less hassle and less risky ways to have an income in retirement than to become a landlord. 

If you did want an income and were absolutely determined then a small 2 bed cottage is probably a bad idea, and a student house with multiple bedrooms Ora modern flat (or flats) would likely be better with higher income, though just for your daughter and her partner the cottage sounds better. 

But all the rules on tax (initial and ongoing), and evictions make this idea a poor choice IMO. Even if you buy the cottage and sell it when she left you'd likely be better off just to give her money to rent.

Markneath

You were technically your husband’s lodger so no rules were broken but your looking to do something different. 

Your girlfriends partner would be your tenant if only he is paying you rent and technically she would be his lodger so what happens if they split up?

He stays and she leaves until you can evict him unless he’s happy to move out. 

[Deleted User]

pinkzebra said:

Thanks for your responses. In response...
My daughter is currently in her first year in halls. Partner is also a student, so no council tax. 

I think we will have to see a mortgage broker - it seems a bit more complicated than I imagined! When I first lived with my partner (now husband) he had a mortgage, and I just moved in and gave him some money towards the bills. No idea this went against mortgage rules! Or maybe it didn’t, as I just paid the bills, and no rent?! Would it be possible to get a mortgage (not btl) and not charge either my daughter or her partner rent, and just for them both to pay the bills? Is that allowed? Obviously whatever we do, there would have to be a contact between us. 

lika86 - We dont have a burning desire to be a landlord to students, but do want to be landlords, so we have a better income when we get older. We are currently paying nearly £7000 a year for my daughters accommodation- which is why we are thinking about doing this next year. It just feels like we’re throwing our money down the drain. 

You moving in with your husband-to-be and contributing towards the household costs is nothing like buying an investment property and charging the occupants rent. 

hazyjo

Markneath said:

You were technically your husband’s lodger so no rules were broken but your looking to do something different. 

Your girlfriends partner would be your tenant if only he is paying you rent and technically she would be his lodger so what happens if they split up?

He stays and she leaves until you can evict him unless he’s happy to move out. 

No, the OP nor the daughter's BF are "technically lodgers". If you're in a relationship with someone, you can't be their lodger.

OP you're getting confused. When you moved in, your OH owned the property. You had no real security and could have been booted out (today's rules, may have been different back then). You were not a tenant and had no real rights. It would not have been against mortgage rules. (They don't insist you stay single forever!)

If you were to own a property and moved anyone in with you not living in the property, that would make you landlords. That would mean you would have to comply with all landlord's legal requirements, responsibilities, etc.