Second property

Cacran

Our daughter is currently sharing a flat with her boyfriend. the relationship is not good. She wants to move out but cannot afford to rent on her own. She does not want to live back with us as she works quite a long way from our house and has a circle of friends in the area where she lives. She cannot possibly afford a mortgage. We are at a loss as to what to do. She caqn only afford about £200 a month so if she managed to get anyone to share with it would have to be about £400 a month and those are usually only one bedroomed. I wondered what it would mean to us if we were to buy her a house, well not actually for her, for us to buy a second home and rent it to her at a price she can afford.
My husband is hoping to get redundancy soon. With the money he could get together with our savings, we may be able to afford a modest property to let to her. Our house has no mortgage,I only work 7 hours a week and my husband was hoping to get a little part time job and to live off the interest from the bank and his pension. We do not fully know the figures yet or know if we can manage on that. I thought that if she paid us in rent just a bit more than the interest we would have got with it being in the bank it may be an idea.
If we had another property would she have to pay rates as a tennant or would it be better for us to get rent from her as a private arrangement and for us to pay for the running of the property, fully. Basically, what I want to know is, what are the pitfalls in owning another property outright, financially.

I would appreciate anyones opinion on this idea.

EdInvestor

Has she looked into renting a room in a shared house?

chesky369

Before you go any further with this idea you and your husband MUST calculate his pension, your earnings and the bank interest, to make sure you can afford to live on this without his redundancy money and the part time job which he may not be able to get. You cannot afford at this stage in your lives to get your sums wrong.

Others on here will be able to advice on capital gains, etc. with regard to a second property. But instead of you buying a property, would it be possible to lend your daughter enough money for a deposit on a small flat? This would mean you would still have some of the redundancy cash left.

seven-day-weekend

One of our options for the future is to sell our Spanish property and buy a flat which our son could live in and pay rent.

Bear in mind that it is not usually possible for the tenant to claim Housing Bnefit in this situation if they are out of work.

With an Assured Shorthold Tenancy which is the norm for this sort of arrangement, she would be responsible for the Council Tax.

You/your husband would have to pay tax on any profit.

If/when you sell it, you may be liable for Capital Gains Tax.

Hoope this helps.

Cacran

EdInvestor wrote: »

Has she looked into renting a room in a shared house?

Thanks for the advice.
Yes ,she has looked at these but there is nothing really suitable at present. I have spoken to her about lots of options but she is afraid that if she doesn't get anywhere fairly decent that she can feel happy in, she will get depressed and may go back to the guy. I know it sounds strange but she did this before, you see. He is the sort of person who convinces her he has changed and she still carries a torch for him but is slowly seeing the light. She is strong willed and although she is having an impossible time at the moment, she has to make her own mind up. He has run up a 10 grand debt in her name to keep up his lifestyle going, now she says he only pays the interest back, which is a lot but does not get the debt down at all. We are at our wits end trying to help her but we could not bear to pay off this money that he has spent, while we live a modest lifestyle. He gets his way by being violent towards her.

Cacran

chesky369 wrote: »

Before you go any further with this idea you and your husband MUST calculate his pension, your earnings and the bank interest, to make sure you can afford to live on this without his redundancy money and the part time job which he may not be able to get. You cannot afford at this stage in your lives to get your sums wrong.

Others on here will be able to advice on capital gains, etc. with regard to a second property. But instead of you buying a property, would it be possible to lend your daughter enough money for a deposit on a small flat? This would mean you would still have some of the redundancy cash left.

I can see that we must wait to find out what our situation is going to be first. Our daughter only earns enough to get a £48,000 mortgage and could not actually afford that taking into consideration her outgoings. She needs a car for work etc and internet for her OU studies.

We wish she would come home and travel the distance to work. She thinks she will be pushed back into the relationship. Her boyfriend has a huge credit card debt in her name and finantially she is in a fix. We are so worried about the situation. We are also wary that he could try to get more money from her if we loan her any, that was why we thought to get a property in our name. Realistically we are probably going to have to step back and let it be her problem but it is so hard when you love your children.

EdInvestor

seven-day-weekend wrote: »

Bear in mind that it is not usually possible for the tenant to claim Housing Bnefit in this situation if they are out of work.

Is that right 7DWE?

I'd understood that as long as it was done on an arm's length basis - market rent, ongoing AST, fully declared to taxman etc, then the tenant could claim HB?

EdInvestor

Cacran wrote: »

I can see that we must wait to find out what our situation is going to be first. Our daughter only earns enough to get a £48,000 mortgage and could not actually afford that taking into consideration her outgoings. She needs a car for work etc and internet for her OU studies.

We wish she would come home and travel the distance to work.

Can she not look for a room a bit further afield?

She thinks she will be pushed back into the relationship. Her boyfriend has a huge credit card debt in her name and finantially she is in a fix.

How then could she afford her mortgage?

We are also wary that he could try to get more money from her if we loan her any, that was why we thought to get a property in our name.

In that case you certainly shouldn't do it.

Realistically we are probably going to have to step back and let it be her problem but it is so hard when you love your children.

IMHO that's the way to go.Suggest to her she tries chatting to the CAB about how to get the debt sorted out. That seems to be the key to ending the relationship - which seems to be the basic problem.

chesky369

This is a problem that in the end, only your daughter can solve. The two major problems she has are (a) his violence and (b) his stealing money from her - which is really what it is.

Perhaps she should think of having some kind of psychological counselling, to prove to herself that she is worthy of a better life. It's only when she has this kind of self-worth that she will be able to deal with her situation. All you can really do is keep telling her that you will stand by her if she needs you.

seven-day-weekend

EdInvestor wrote: »

Is that right 7DWE?

I'd understood that as long as it was done on an arm's length basis - market rent, ongoing AST, fully declared to taxman etc, then the tenant could claim HB?

You have to be able to prove that you own the property as a commercial venture. For example, has it been rented to anyone else, or would it be if your relative didn’t live in it, what sort of mortgage do you have etc.

If they believe it is a ‘contrived tenancy’, i.e that you have only bought it so your relative can live in it, they won’t pay HB.

I was able to successfully prove a commercial venture on an investment flat we used to own by showing them my mortgage contract which had a clause in it allowing me to create a tenancy, and a letter from an Estate Agent saying it had been rented on the open market before my son came to live there.

He still had to have a proper tenancy agreement and rent book though.

(Whoops! Sorry about the huge font!!).

Errata

This must be worrying you to death, it's an awful situation.
The difficulty may be that with such a large amount of debt and only the interest on it being paid her credit rating must be too awful to contemplate. If this is the case she may experience great difficulty finding somewhere to rent, or share, becuase of landlord's credit checks.