Buying a 2nd house for a child to live in.

Scruffy_Meee

We have a 20 year old son who needs to move to another town for work. We are thinking of buying a flat (part cash part Mortgage) for him to live in with him paying the basic bills.

What would be the main pitfalls of doing this, we would buying the flat in our name. I am aware that some BTL mortgages do not allow family members to live in the property and we would be liable for the full Stamp Duty along with paying CGT on any profit when it comes to selling?

Any advice would be greatly appreciated.

MeteredOut

Scruffy_Meee said:

We have a 20 year old son who needs to move to another town for work. We are thinking of buying a flat (part cash part Mortgage) for him to live in with him paying the basic bills.

What would be the main pitfalls of doing this, we would buying the flat in our name. I am aware that some BTL mortgages do not allow family members to live in the property and we would be liable for the full Stamp Duty along with paying CGT on any profit when it comes to selling?

Any advice would be greatly appreciated.

Its not just full stamp duty you would pay. If he were buying, he'd get the first time buyers relief (assuming he's never owned a property before). You would not get that, and you'd also have to pay the additional stamp duty for a second property.

https://www.gov.uk/stamp-duty-land-tax/residential-property-rates (assuming England)

If you share the property value, we'll be able to work the additional stamp duty you'd have to pay.

Would you consider gifting him the money so he can buy it and get first time buyers relieft, or would he struggle to get the mortgage?

theartfullodger

Common advice from experienced landlords is don't rent to friends or families.  A very quick way of ruining relationships.

Support the lad but he should rent from someone else.  Don't be guarantor - it's a blank cheque.

Done any training or education in being a landlord?

Good luck...

saajan_12

Any reason he can't rent in the new area (possibly with you subsidising)? If you're worried about 'throwing away money', its likely much less than the stamp duty + solicitors + mortgage interest if this only lasts a few years. It takes several years before that's all recovered and actually becomes cheaper than renting. 

At that age in a new area, it could go great but he could also find he wants to move area / job. Its much easier to be flexible when renting. Once settled, he'll have a much better idea of the area plus also have more work history to potentially get a mortgae and purchase himself (even with you subsidising). 

mta999

That is assuming the lad's income is enough to satisfy rental.requirements.

monkey-fingers

To assume makes an !!!!!! of u and me.

I've not seen anything where it talks about the child renting?
It says basic bills.

How about a different scenario. The OP puts the mortgage on their own property and buys 100% in cash.
Then, their rules. Residential mortgage only, which I can imagine would have better interest.

sheramber

monkey-fingers said:

To assume makes an !!!!!! of u and me.

I've not seen anything where it talks about the child renting?
It says basic bills.

How about a different scenario. The OP puts the mortgage on their own property and buys 100% in cash.
Then, their rules. Residential mortgage only, which I can imagine would have better interest.

If you read the post two above yours you will read the suggestion that he rents instead of the OP buying. 

monkey-fingers

sheramber said:

monkey-fingers said:

To assume makes an !!!!!! of u and me.

I've not seen anything where it talks about the child renting?
It says basic bills.

How about a different scenario. The OP puts the mortgage on their own property and buys 100% in cash.
Then, their rules. Residential mortgage only, which I can imagine would have better interest.

If you read the post two above yours you will read the suggestion that he rents instead of the OP buying. 

And that was the assumption.

People are assuming that this person will be paying rent. The way I see it is that the parent is looking to buy a house, but their child will pay the bills (council tax, utilities, insurance etc.)

MeteredOut

monkey-fingers said:

sheramber said:

monkey-fingers said:

To assume makes an !!!!!! of u and me.

I've not seen anything where it talks about the child renting?
It says basic bills.

How about a different scenario. The OP puts the mortgage on their own property and buys 100% in cash.
Then, their rules. Residential mortgage only, which I can imagine would have better interest.

If you read the post two above yours you will read the suggestion that he rents instead of the OP buying. 

And that was the assumption.

People are assuming that this person will be paying rent. The way I see it is that the parent is looking to buy a house, but their child will pay the bills (council tax, utilities, insurance etc.)

That's how i read it too:

"We are thinking of buying a flat (part cash part Mortgage) for him to live in with him paying the basic bills."

"basic bills" being council tax, energy etc, but not rent.

Scruffy_Meee

Thank you all for your input, it would be just for him to have somewhere to live, he would cover the minimum where we would cover the rest. We cannot really afford to gift him the money as we will need it one day in retirement, so its just a short term thing to help him out for a couple of years. 

JuzaMum

If it's literally going to be a couple of years, is it worth the expense? Higher rate stamp duty, legal fees etc really add up. If it was going to be for longer, it may be worth it. Fwiw, I have bought a flat that I rent to my son. I have done everything correctly, deposit protected, correct paperwork, insurance etc. The only thing I'm not keeping up with is putting the rent up! I do trust him, and if he got into problems, I would support him but I could legally evict him if it came down to it. It's working really well for us, he's happy and secure and I'm not worried about him.