Anyone have any experience of buy to let, especially to family? I'd expect a few on here to have some...insight welcome! My lad is renting and I'd like to get him on the property ladder. But he's in a new relationship, seems to be bringing most to the party (although they earn similar money) and I'm a bit worried all his savings could be lost if it went pear shaped. So got me thinking about buy to let. Only one child, so its all his eventual;y, so I could grab some of the increased in equity over last couple of years and probably get him what would be a nice starter home and rent it to them. With a view, in a few years, to 'sell' it to him minus any deposit I have put in, i.e. just clear the mortgage. My queries: - tax! will I need to be a business (again!) and therefore self assessment bollox? - could I stick the additional income (mortgage will be c450, will charge him 800)over mortgage cost in a fund, not draw down so therefore not take any profit and pay any tax - What about landlord responsibilities: rent book, house ins, etc etc. Easy or PAIT red tape Remember i'm doing as something for him not a business, so looking least hassle possible.
I know this does not answer your question,but might be relatively hassle free.Would something like a Pre-Nuptial agreement be of any use? This would then protect both your son and his partner.
not sure we're celeb enough for that and pretty sure he wouldn't want it...and I wouldn't suggest it tbh. Not sure how enforceable they are these days really
Most buy-to-let mortgage companies have specific exclusions when it comes to letting to close family. By letting to your son without informing the mortgage company is effectively mortgage fraud (if it comes to light). Mortgage companies look for a monthly rent in excess of 125% of the mortgage payment. You need to get a mortgage broker on the case and find a lender who covers what you want to do. I looked into this when the mother-in-law needed to move into a smaller place from a rented house. Was looking easier to buy somewhere outright than try to mortgage it.
You would not need to become a business again but you will be liable for tax, the rules have changed recently on what can be deducted from your liabilities for house repairs. It’s still profit whether you draw it out or not, you’re effectively earning after the mortgage £350. You’ll pay more interest on a Buy to Let than if you just bought it with a ‘home buyers’ mortgage. Give him/them a rent book it’ll make it straightforward only in his name. The bricks and mortar are your responsibility the contents are theirs, you’ll need a gas cert, smoke alarms(mains fed).
The stamp duty holiday will also help you out. You pay additional stamp duty normally on the purchase of a second home. Just checked, you still have to pay 3% + depending on cost. That was in addition to the normal rate on an only home.
Oh yes another thing is you as the landlord are responsible for all the repairs, I’ve been up my rental house whenever I’ve been needed sometimes it’s a real pain in the ass. But then I’d guess he’d probably be calling on you if it was his house in any case.......
Anyone loaned money on a more formal arrangement or been ‘part share owners’ with others who then mortgage their bit?
could you lend him the money - simple deed or note properly witnessed.signed/dated and notional interest rate agreed- and also take a formal charge over the property via land registry for the amount of the loan, so that 'your' money is protected - if house is sold you are involved in any proceeds by virtue of the registered charge( prob second charge after any bank or build soc) , and he manages his/partners money/contribution, so he learns and owns/is responsible for that part of the situation. none of this is advice and it may contain holes/ points and aspects are worth investigating properly, but some points for thought
If you search the Daily Mail, This is Money web site, there is a similar example with a son wanting to give a loan to his mum and dad to buy a bungalow. IIRC, there were 3 or 4 options discussed, with a direct loan being the recommended option. Andy
I was thinking, like a shared ownership scheme. Which is what this sounds like. May be worth investigating
have a word with a good independent mortgage advisor they will give you the low down on the best way to help him. i rent a property to my daughter and have no problems but you will have to pay tax on your profit
Not really. The two can be unconnected. You can take a charge out over property which has an impact on how the sale process and proceeds are handled-security if you will. Means you are involved/informed of a sale is underway. Does not have to be linked to a loan. Reminder - I’m not an expert or claiming any qualification here, just thoughts based on similar experience.
You can set up a part share ownership with either shares or a fixed sum charge on the property. I have done both. Easy to set up at purchase with your solicitor. Edit. If you choose the former you would probably go the 'Tenants in Common Route' which I did.
Colour me cynical, but my experience with any sort of financial advisor is that, after reviewing your entire financial position, and tapping their calculator, their advice always just happens to be, "buy this product [that gives me the most commission]."
I put a substantial deposit on my daughters house when she bought it with the balance on a mortgage taken out by her and her partner. I had the conveyancing solicitor note my share in the property and the way it was worded was that in the event of a sale or change of circumstances my share was secured and second in line after the building society. My daughter and partner split shortly after the financial crash and she took over the mortgage on her own. Had there been any unsecured equity I think the guy would have tried to get some so I`m glad I took the action I did.
Prob via a formal charge registered at the land registry and the bank or build soc who did the mortgage wouldn’t have let your charge rank ahead of theirs hence second priority
Bradders, even giving your son a direct loan will mean nothing to her property rights if she becomes a common law wife.
Mortgage brokers work on a fee or a commission or a combination of both. A direct question to them and they will tell you how they are getting paid. The commissions they receive are not great, average about 0.35%. I used a mortgage broker to fund the purchase of a second home and their fee was acceptable for the amount of work they did in getting me a great deal on a short term mortgage.
