Buying a Flat for Student Daughter To Live In

JamboWeb65

Brie said:

Will you be setting yourself up as a landlord with your daughter as tenant?  Are you setting any rules about how she runs the place, who lives there, if she must leave if you decide to sell etc?

Thanks Brie, we weren't thinking of setting ourselves up as landlords but if it was to our advantage financially we would.

I know it was suggested us simply giving a loan of the money to our daughter and then we would avoid Land Transaction Tax.  

I'm wondering if there is anything taxation wise that we need to consider?

We have no intention of subletting the flat with an additional tenant initially but may rent it out later.  We also have no concerns about how the flat will be looked after although a consideration would be if my daughter didn't complete the degree. 

 

silvercar

JamboWeb65 said:

Brie said:

Will you be setting yourself up as a landlord with your daughter as tenant?  Are you setting any rules about how she runs the place, who lives there, if she must leave if you decide to sell etc?

Thanks Brie, we weren't thinking of setting ourselves up as landlords but if it was to our advantage financially we would.

I know it was suggested us simply giving a loan of the money to our daughter and then we would avoid Land Transaction Tax.  

I'm wondering if there is anything taxation wise that we need to consider?

We have no intention of subletting the flat with an additional tenant initially but may rent it out later.  We also have no concerns about how the flat will be looked after although a consideration would be if my daughter didn't complete the degree. 

 

If she will also need a mortgage then the money will need to be a gift not a loan, as mortgage lenders aren't happy with loans other than the mortgage. She could of course decide on sale to pay you back voluntarily.

If it is her home owned by her, then there are no taxation issues that I can think of. The only "risk" is that if you have a large estate and pass away within 7 years of the gifted deposit, it could be considered part of the estate and subject to IHT. 

lika_86

silvercar said:

JamboWeb65 said:

Brie said:

Will you be setting yourself up as a landlord with your daughter as tenant?  Are you setting any rules about how she runs the place, who lives there, if she must leave if you decide to sell etc?

Thanks Brie, we weren't thinking of setting ourselves up as landlords but if it was to our advantage financially we would.

I know it was suggested us simply giving a loan of the money to our daughter and then we would avoid Land Transaction Tax.  

I'm wondering if there is anything taxation wise that we need to consider?

We have no intention of subletting the flat with an additional tenant initially but may rent it out later.  We also have no concerns about how the flat will be looked after although a consideration would be if my daughter didn't complete the degree. 

 

If she will also need a mortgage then the money will need to be a gift not a loan, as mortgage lenders aren't happy with loans other than the mortgage. She could of course decide on sale to pay you back voluntarily.

If it is her home owned by her, then there are no taxation issues that I can think of. The only "risk" is that if you have a large estate and pass away within 7 years of the gifted deposit, it could be considered part of the estate and subject to IHT. 

The other issue for her in owning would be loss of first time buyer benefits if she later wanted to move elsewhere and buy a 'proper' first home.

dimbo61

Have you looked at the prices of flats in Dundee ?
Would you want a 1 or 2 bed flat ? 

jonnydeppiwish!

Is there any reason why your daughter doesn’t get a student loan to cover it rather than you pay for it? They are choosing to do a second degree

jennifernil

silvercar said:

jennifernil said:

We did this for our DD back in 2003.  We bought in her name and were guarantors on the mortgage,  but she was initially on a 5 year degree, in Glasgow.

As it happened, she went on to do a PhD, so was there for 7 years, then after getting a job was there till 2012.

She still has the flat as she chose to rent it out, and we now have her mortgage, to give her flexability.

She pays us monthly, we have a charge on the property, and will repay the capital when she sells it.

I thought lenders weren’t keen on charges on property and that gifted deposits had to be gifts not loans.

Sorry....insufficient info!

She had a mortgage at first, then after a few years we  paid that off.    When  she moved to a different house in 2012, we set up a private mortgage to release some of the value for her next deposit as it was not a good time to sell.

user1977

jonnydeppiwish! said:

Is there any reason why your daughter doesn’t get a student loan to cover it rather than you pay for it? They are choosing to do a second degree

To cover what? The price of a flat?

_Penny_Dreadful

jonnydeppiwish! said:

Is there any reason why your daughter doesn’t get a student loan to cover it rather than you pay for it? They are choosing to do a second degree

Student loans are generally only for your first degree. You don’t get two bites of the cherry. 

km1500

Gift your daughter the money

She buys the flat in her name and lives there

There is no additional stamp duty to pay and no CGT on any increase in value

Alderbank

dimbo61 said:

Have you looked at the prices of flats in Dundee ?
Would you want a 1 or 2 bed flat ? 

I live about 25 miles from Dundee.
It has its problems but it is a lively city with good night life.

This is an example of a 1 bed flat for (offers over) £65,000. It looks quite reasonable to me and is about a mile from Hawkhill where the main campus of the University of Dundee is situated.
https://www.rightmove.co.uk/properties/134418530#/?channel=RES_BUY
There are plenty of others.
Private residential landlords are being squeezed by the Scottish government so several are now selling properties like these.