Could your parents be your landlord?

Issues with renting
Jan 14 2019

Could your parents be your landlord?

Is this trend still on the increase? I read an article from one of the major finance lenders and they claimed that number of parent/grandparent landlords will hit 2 million in 2019. With over 50% offering the purchased buy to let property to their children/grandchildren at a discounted rate.

How will this trend impact on the letting industry or will it have no impact at all?

The same research showed that already there are over a million parents owning buy to let properties and are renting these out to their children. With property prices showing no real sign of slowing down this trend is only going to increase.

Long term will this add stock to the rental property market once the parents pass their own homes to their children?

The number of parents actually charging the current rental rate is around 10%, with around 30% setting the rent on a cost neutral basis,  but these figures are speculative as many do not seek the assistance of letting agents preferring to keep it in the family.

For those children that are considering a house purchase over 10% expect their parents to fund the deposit for the property.

You can see the reasoning behind the parents if they are expected to pay for the deposit they might as well own the house. When they part this world will the children then inherit both properties increasing rental stock?

It is only human nature that parents want to help their children find a place of their own, however I was surprised to fiind out that it was over a quarter of them who are renting a second home to them. Allowing them to then save up for their own property. It will be interesting to see if when their children move out, the parents then continue to rent the property?

Motivation for providing rental property for their kids include:

  • Allowing them to save for their own property
  • Providing a safe property
  • Keeping them close by when they fly the nest
  • Parents financial interest
  • Helping them move out

I cannot see the trend declining as soaring property prices keep most kids off the property ladder. With rental prices also increasing for those parents that can buy a second home it makes good parenting and financial sense. The research does show that being a ‘parent landlord’ doesn’t come without its drawbacks. Just over 30% worry about clashes regarding rent, while a quarter question how well their child will take care of the property. With this in mind I would recommend that a legal rental agreement is in place to prevent parents and children falling out. This would remove some of the challenges that this process has on the whole family.

renting versus owning

Is it a win win situation for both the parents and their children? By becoming a ‘parent landlord’ they are able to provide support, without necessarily having to compromise on their own living space. As mentioned earlier this not only provides their children with the opportunity to save for the future, but can act as an investment can help with their own long-term financial planning.

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