Should I buy a small house or a flat for my children?
I have two children both attending the same university. One just started and the other is about to graduate.
It is a really helpful thing to do for your children, because it gives them security and a good place to live, without being at the mercy of (sometimes) uncaring landlords. This kind of arrangement usually works out, although you need to consider what will happen to the property when the children move area. Will you, for example, continue to rent it out to students? This can be lucrative, but can also cause additional cost. You may be able to safeguard yourself by renting direct to the university housing department, in which case your rental income will be lower but secure, and the property will be maintained by them.
On the other hand, if you intend selling the property after, say, three years, then you would have to be prepared to take a loss if house prices have fallen.
So, the main reason for doing this is to help the children - and in my book that is an excellent justification; you may make some money, too, but if your main aim is housing investment, then renting to your children (or letting them live in it free) is not so good; after all you would be very unlikely to evict them if they did not pay the rent!
You might run up against some mortgage issues, here. If you buy the property on your savings, or by increasing your own residential mortgage, there will be no problem. However, if you go for a by-to-let mortgage do bear in mind that lenders usually do not permit relatives to occupy your rental property. | 01.03.11 @ 18:13