Buy to let for Son and Pension

A question about : Buy to let for Son and Pension

Hi all,
I have spent a couple of days now trawling through the internet reading buy to let advice and frankly getting lost in what I can and can't do. I would appreciate guidance on simple ways of achieving my desire to set up my son in a home whilst investing for my retirement. I currently have a home worth around Ј215K and have 12 years left on my mortgage (78k still outstanding). My son is 23, single and has a full time job on around Ј16k pa. I have seen a lovely 2 bedroom apartment close to where I live priced at Ј115K and it would be an ideal starter home for my son. He craves for independence and I would love to help him find a place in a good area and affordable so he can live whilst having financial commitments . He had about Ј7K in savings and I have equity in the house. No other savings. Is there a way I can utilise my equity to 1) buy a second property as an investment for my retirement (I am 53) and 2) Rent this property to my son until such time he is financially able to afford his own? Many thanks

Best answers:

• If you wish to buy this property you'll need topass elgibility criteria for the mortgage No point quoting us his salary - we need yours!
  Also need the expected market rent. And the mortgage repayment amount. And the amount of equity you have.
  Note that most BTL mortgage lenders prohibit letting to family.
  Speak to an independant mortgage adviser.
  I too advise against letting to family. What if son loses his job and defaults (through no fault of his own) on the rent? Will you evict? Can you afford the mortgage if he stops paying rent?
  Have you read:
  https://forums.moneysavingexpert.com/....php?t=5180214
• Apologies for omitting info...Assumptions are
  1) Im on circa Ј34K
  2) Rent on similar property in the same area is Ј650 pcm
  3) If son is unable to meet rent (long term) then we would put the property on the market to let out
  4)We could afford to fund both properties if empty
  5) Although we want to give our son a chance to get independence we would ensure that we treat this as a business agreement.
  6)Long term we are looking at using this property to sell on retirement (given house prices increase).
• How do you intend clear your mortgage before retirement (assuming you want to?).
• we can therefore stop right there. Your plan is a dead duck
  all BTL mortgages require at least a 25% deposit. Deposits cannot be counted using borrowed money and the only way you can get cash in your circumstances ("you say you have no other savings") is to release equity from your home by borrowing against it
  even if you had the cash letting to a family member makes it what is called a "Regulated" BTL mortgage and there are very few lenders in that particular market and they have tougher terms. With an income of only 32K, an existing debt of over x2 your income and a need to raise a further 115k (+ buying costs) you have no chance
• The OP could remortgage their home to release equity and use that money as a deposit for a regulated BTL. That would mean higher repayments for the OP's home though. Maybe the OP should speak with a mortgage broker to crunch some numbers.
• If your son pays Ј650 a month in rent.., how will he afford to live (remember there's council tax to pay too)? Can you trust him to get a second job? Can you trust him to not trash the place/have all night parties with drunken friends? Would he be willing to have you rent out the second bedroom?
  Why can't your son rent a place for himself? Does this mean he's a bad risk?
  Can you afford to redecorate/repair if the property needs it?
• why not just gift him a deposit to either buy his own flat, priced at one he can afford on is wage (that is giving him true independence) or just gift him a deposit to go and rent for six - twelve months, again to see if he can afford to live independently. from your post replies, you have at least considered what if he cant afford to live on his own, by gifting him or loaning him the deposit to go and rent, so why not let him try it for a year or so?
  renting to your own family/friends is a nightmare about to come true, sure there are some good outcomes but the horror stories cant be ignored
• Hi all above, many thanks for your constructive replies. primarily I was hoping to utilise my equity to get a second property for a retirement investment whilst at the same time help my son by letting him let the place before he moves on. I would then let the property again until such time as I could sell. Maybe I should forget that's tis avenue has a dead end and just pop down to the newsagent instead and buy another scratch card! Many thanks for your contributions
• nothing wrong with utilising your equity to get a BTL, just don't rent it to your son. use some of it as deposit for him for his own flat, rented from someone else. if as you say, you would have rented to him at market value, whats the difference? where is the benefit to you or him?
• The OP could use the equity in his home to buy a BTL and let it out to a member of Joe Public though.
  If his son craves independence then he could move into a shared house and/or find a better paying job.