purchase house as FTB, then register to accept RA?

[dmos87]

Hello all,

Bit longwinded so please stick with me on this one!

Hubby and I are new parents to a devine 3 month old, and have been mad to get on the property ladder for a few years now. We've been looking for that investment house, or even something to get us going - basically to have our money working for us.

Theres a 3-bed Semi available for sale in our area at a very affordable price - to fix for 5 years would show repayments under €500 a month. We're in an amazing position to not be paying any rent where we are, and are in no rush at all to leave here.

Now on the other side; My sister is a single parent to a toddler living at home with my parents. She is desperate to move out and have space for her and her son, and being honest my parents are definitely ready to have their home to themselves. She has been approved for Rent Allowance of 700 a month, however cannot find a house - they either don't accept Rent Allowance, or they want more than 700 per month which she cannot go over.

My plan is this; hubby and I purchase the 3 Bed semi as first time buyers. 1-2 months later, we register with the PRTB and take all steps needed to be able to accept Rent Allowance. My sister and her son can then move into the house, just as a normal tenant would do. We would receive Rent of 700 a month guaranteed and the house would be kept in great condition, plus my sister and her child have a nice home and my parents get their lives back.

My questions are:

1) Is it possible to do the above? We cannot afford the deposit required to buy to Let so this would be the only way around it for us.

2) What are the annual costs associated with this - i.e., do we have to have a letting agent & management company or can we avoid that, etc.

3) Would the council allow my sister to rent my home, all above board?

This is likely to be a long-term thing, and if not, myself the hubby and our LO would be happy to live there.

Any thoughts appreciated, and advice certainly welcome!

 

[murphaph]

1) You'd have to be sure your loan offer didn't stipulate that is was only valid for an owner occupied dwelling. You could risk taking an owner occupied loan and and not tell the bank when you let the property out, but you'd be taking a risk there. How they might find out is interesting though as there's no mortgage interest relief at source to cancel any more. Hmmm...

2) Search the site here for the costs, taxes, charges and so on. It's been done to death, honestly. You certainly don't need an agent for this set up, that would be throwing your money away.

3) The council have nothing to do with Rent Supplement (the correct name for Rent Allowance). Do you mean your sister is RAS approved? (Rental Accommodation Scheme). I know of someone who got RS for a property he rented from a sibling, so it is or was doable, If it's all above board, I don't see the harm.

Have you considered worst case scenarios? Interest rate hikes? What if your sis loses her RS? Are you ready to evict her or will you be prepared to pay the mortgage to keep the roof over her head? It could get messy dealing with family. Just some things to consider.

 

[Dermot]

You will need to show that this property has been rented out by you prior to letting it to your sister before your sister will be allowed to rent it from you and she getting RA. I cannot see that you will pass that test. You have no history to show that the house has been rented out by you.

 

[murphaph]

Hi Dermot,
is this a policy of the DSP? Is it a new thing?

 

[Dermot]

murphaph. I think all areas will query the relationship if they have any suspicion that there is a family connection. The vast majority will refuse to allow the rental take place where it is between parent and child and where there is no proof of having the property rented out beforehand. I think they are quite sticky on other close relationships as well. There can be exceptions made where no other suitable accommodation is available. I am not sure whether you could describe it as a policy or a practice but it can be done.

 

[facetious]

My plan is this; hubby and I purchase the 3 Bed semi as first time buyers. 1-2 months later, we register with the PRTB and take all steps needed to be able to accept Rent Allowance.

You obviously do not know all the ins and outs, and up and downs of renting.

You do not register with the PRTB to become a landlord. Once you have a tenant, you register the tenancy.

Being a landlord is NOT the easy life that you may think it is - there are many obligations on landlords as regards housing standards, tenant's rights, and many formal procedures to be observed in the case where a tenant is in breach of their obligations. It is actually a mine field.

Just consider:
What are your rights if the tenant gets into rent arrears?
What are your rights as regards entering the property?
What are your rights as to regaining possession of the property?
What are the differences between a fixed term tenancy and a Part 4 tenancy?
What are the landlord's responsibilities as regards the up-keep of the property.

As a landlord you will be considered to be in business and as such you will be deemed to know ALL the laws relating to that business.

Finally, the best way of having a falling out with family members is to either employ them or rent to them.

 

[Bronte]

1) Is it possible to do the above? We cannot afford the deposit required to buy to Let so this would be the only way around it for us.

2) What are the annual costs associated with this - i.e., do we have to have a letting agent & management company or can we avoid that, etc.

3) Would the council allow my sister to rent my home, all above board?

1. Most likely the bank will have a clause that the property cannot be rented out. I would assume that for current mortgages for 'homes' that they will have got their act together on this.

Can you afford it if the bank charges you the BTL interest rate?

I assume you have a 10% deposit and that for a BTL they would want 20%? Which you cannot afford. Can you afford stamp duty, solicitors fees, furnishings etc.

What if your sister didn't agree to move in, or moved in and didn't pay you rent, or she didn't get RA. Can you rent is as it is and for how much. Can you afford void periods and tenant's who damage your property. Ideally you should have a couple of months mortgage etc to cover this kind of thing.

2. You are confusing letting agents with management companies I think. Do your research. But simple you don't need a letting agent as it's another cost that can be avoided.

3. I think that the approach on the rent is to ask if it's allowed, a siblign renting to another sibling. As long as it's arm's length I don't see why not. But the rules are tricky, maybe post this specific question in the social welfare thread and have a look at the social welfare website.

Are you sure that what sounds good for you and your husband might not sound good for your sister. What if you want to move in after one year? What if she wants to move out after one month etc?