Buying for the next generation
By Jo Eccles
With Londoners’ hopes of owning a home diminishing, we are seeing a lot of parents stepping in to give the next generation a much-needed financial starting block. Currently, approximately 20% of our clients are parents buying for their children, which is great news if you’re one of the lucky ones to benefit.
Despite having spare cash to help with a purchase, most parents want to get it right and view the purchase as an investment at the same time. That’s why advice is imperative. We were hired a few years ago by a father who was just about to put down a non-refundable deposit on a property his daughter had chosen, only to hear the rumble of the tube below as they were agreeing terms of the deposit. He pulled out and decided to seek proper advice. We were hired shortly afterwards and have since bought two more properties for the family’s other daughters.
Many parents like to focus on the peripheral areas, i.e. areas which are just next door to more expensive areas. Fulham and Clapham are particularly popular if the child will be moving in over the foreseeable future, with any spare bedrooms usually rented out to friends of their children – parents can purchase a nice one bedroom flat starting from £400,000 and a two bedroom flat from £550,000.
For parents buying for much younger children, I would advise them to focus on the more ‘up and coming areas’ such as the cheaper parts of Maida Vale or West Kilburn where they can benefit from the higher rental yields of circa 4.5%, and rent out the property for a few years while waiting for the area to gentrify. When the next generation are old enough to be given the keys, they can then decide whether to live in the property themselves or sell and use the proceeds to buy elsewhere.
If your parents are helping you get a foot on the property ladder, ensure they’re organised before they start the search – such as their tax affairs and borrowing options – if they’re able to buy the property in cash and refinance afterwards, then that will definitely help the negotiations and the price they ultimately pay.
If you have a question you’d like Jo to answer please email firstname.lastname@example.org or tweet her @joeccles.