Buy to let to rent to parents at market rate

justkeepgoing

My elderly parents are renting and the property they are in isn't ideal for them.  Suitable rental properties are like gold around here!  I have seen a property that would be suitable and I'm trying to work out how complicated it would be for us to buy the property and rent it to them.  Most of the advice I've seen assumes that the rent would be lower than the market rate and therefore a buy to let mortgage wouldn't be suitable.  The idea is that they would pay the market rate which we would use towards the mortgage.  This would be less than they are currently paying in rent.  We could put down between 30-40% deposit and they would possibly be able to cover the stamp duty.  Long term, we would keep it as a rental property.  Is this really as complicated as all the advice I've seen makes it appear?!?

kasqueak

I’m not sure why renting it to your parents complicates the idea of getting a BTL mortgage? Especially if your parents are paying market rate for the rent. 

I’d speak to a mortgage advisor specialising in BTL mortgages and go from there. 

Years ago my now husbands parents bought a flat on a BTL mortgage and he rented it from them at market rate for about 18 months. After that they found a new tenant and they still rent it out to this day. 

princeofpounds

No BTL lender would countenance lending on a property with a tenancy granted to your own family. It's not possible, unfortunately for your situation.

You may be able to raise a (larger?) mortgage against your own property and buy the property with cash.

MaryNB

princeofpounds said:

No BTL lender would countenance lending on a property with a tenancy granted to your own family. It's not possible, unfortunately for your situation.

You may be able to raise a (larger?) mortgage against your own property and buy the property with cash.

They would be able to get a regulated BTL to let to family members. 

A sticking point might be the below market rent. Generally the terms of a BTL mortgage include the rent being something like 125% of the mortgage repayments. 

SDLT_Geek

justkeepgoing said:

My elderly parents are renting and the property they are in isn't ideal for them.  Suitable rental properties are like gold around here!  I have seen a property that would be suitable and I'm trying to work out how complicated it would be for us to buy the property and rent it to them.  Most of the advice I've seen assumes that the rent would be lower than the market rate and therefore a buy to let mortgage wouldn't be suitable.  The idea is that they would pay the market rate which we would use towards the mortgage.  This would be less than they are currently paying in rent.  We could put down between 30-40% deposit and they would possibly be able to cover the stamp duty.  Long term, we would keep it as a rental property.  Is this really as complicated as all the advice I've seen makes it appear?!?

Have you allowed for the extra 3% SDLT if you buy the new property when already owning property?

K_S

justkeepgoing said:

My elderly parents are renting and the property they are in isn't ideal for them.  Suitable rental properties are like gold around here!  I have seen a property that would be suitable and I'm trying to work out how complicated it would be for us to buy the property and rent it to them.  Most of the advice I've seen assumes that the rent would be lower than the market rate and therefore a buy to let mortgage wouldn't be suitable.  The idea is that they would pay the market rate which we would use towards the mortgage.  This would be less than they are currently paying in rent.  We could put down between 30-40% deposit and they would possibly be able to cover the stamp duty.  Long term, we would keep it as a rental property.  Is this really as complicated as all the advice I've seen makes it appear?!?

@justkeepgoing With a 30-40% deposit, the scenario outlined is not particularly complicated, just needs the right product called a regulated BTL (not all lenders offer it) and find a specific one suited to your particular circumstances and requirements.

Alternatively, a second residential mortgage could also be a possibility if your affordability numbers stack up.

Both the above could later be remortgaged to a normal BTL mortgage once your parents no longer live there.

If you are seriously considering this route, I would recommend getting in touch with a mortgage broker to get a realistic idea of your options.