On The Horns Of A Dilemma

Desert Orchid

Desert Orchid

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Picture the scenario...

Girls A & B have been best friends for many years (about 15 - they are now about 19).

They are both at the same university since last year and for the last year they have been paying for halls of residence. The parents of both discuss the possibility of them sharing a flat but parent A says he can't go down the route of involvement in buying a flat for them to share because it will have Inland Revenue implications for him (he owns his own business).

Parents B decide to look for a flat for their girl. They want the best for her and they are acutely aware of the friendship between the two girls, which they feel is something worth treasuring. Rather than look for a 1-bedroom flat, they go the extra mile to buy a 2-bedroom flat to enable the friend to move out of halls and share with daughter B.

The parents of daughter A are estranged. The father owns his own firm, has a new family and his daughters by the new mother go to private school in Oxfordshire. He phones the parents of daughter B to ask if they've found a flat. They say yes. They've paid the going rate (and then some) to get the right kind of flat in the right kind of area. The mortgage comes to £w per month, the contents insurance to x and the the utilities to y and the factoring fees to z. They ask parent A for (w+x+y+z)/2 per month.

Parent A says why should he shell out that kind of money for no return when parent B is shelling out the same amount and benefitting from the increased value of the property?

Parent B says that's what it costs to have the property therefore the costs should be halved and refuses to settle for anything less than (w+x+y+z)/2. He is not asking parent A to contribute to the deposit, legal fees, financial adviser fees, etc. He has foregone a summer holiday (as well as a holiday for the five-year term of the mortgage) to research, locate, secure and enable them to have this flat.

Parent A says the request halve all other costs is unreasonable.

My question is, which, if any, of the parents is right? Should parent A share the costs of factoring and insurance, etc., while parent B is the one who is going to make money on the property in the long term?

The girls' friendship, though extremely strong, is being jeopardised by the intransigence of both sets of parents.
 
Originally posted by Desert Orchid@Sep 17 2006, 12:01 AM
Parent A says he can't go down the route of involvement in buying a flat for them to share because it will have Inland Revenue implications for him (he owns his own business).
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There's the first worry - he's talking bollocks and as he is used to running a business he is probably quite aware that he's talking bollocks too. If he bought a flat, or half a flat, for his own daughter and she lived in it without paying him rent the inland revenue would have no interest in it at all. If he were to sell the house after his daughter graduated and there was a profit, assuming that he owns his "primary dwelling" himself, there would be a capital gains tax implication. As there would for anyone else whether they owned their own business or not.

So parent A is a tight-fisted bastard who thinks up excuses to avoid forking out any money at all.

However, let's imagine that parent A and bhis daughter emigrated to Australia (it's betterthan imagining that they got run over by a bus). Parent B and his daughter would then be looking for a person - or persons - to share the flat. Anyone moving in would expect to pay the going market rent. And that is what girl a should pay.
 
The girls should tell their parents to butt out of their lives, stop trying to make them feel grateful, stop intruding into the time in their lives when they're supposing to be studying for their futures (hopefully, free from further do-goodery by either set of sires and dams), and to leave them in their halls of residence, which I assume they haven't complained bitterly about, or demanded their parents buy them a flat?

This is supposed to be a time in young people's lives when they're trying to experiment with life for themselves, not be tied to another family-owned homestead with implications of emotional ownership. Tell the parents to let go of their kids, for God's sake!
 
Originally posted by krizon@Sep 17 2006, 02:08 AM
This is supposed to be a time in young people's lives when they're trying to experiment with themselves
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Good point Kri. A flat together, alone is a marvellous idea.
 
I'm gobsmacked by this thread, to be honest although perhaps the property situation in Dublin is a factor in this.

Are the daughters in question so precious and lacking in any streetwise-ness that they can't just pay rent [they can work part time, you know, a lot of students do it] and maybe move into an apartment of their own. Maybe it's a cultural thing, maybe it's different here in Dublin compared to wherever these girls may go to college, but while it can be a trial, there is generally plenty of rented accomodation to go around eventually. Yes, you may have to live in a place that isn't perfect, but it's still a formative experience that will help your personal development. In my first year in college I lived in halls of residence or whatever you want to call it, we call it campus here.

For the following two I moved into the centre of town and it was the best thing I ever did - if an apartment had been bought for me at that stage, well, I would expect everything in life to fall into my lap.

If the first solution of parent B was to go ahead and just buy a flat, then I feel that the recipients will have a deluded sense of reality and believe that life is so simple that when there's a little bit of inconvenience, a solution can easily be bought.

This is veering from the point somewhat.

My general point would be that no matter how flimsy the reasons of Parent A may be, Parent B should not have gone over their head and bought a two bedroomed house. That's just not cricket at all, and I would have very little sympathy for such actions. Unfortunately, they may pay for that, but that's the price you sometimes pay for rash decisions. In reality, they should just charge the daughter of Parent A rent to live in the house and treat them as a tenant.

As a general rule, having been through this recently enough, living with close friends can sometimes have damaging implications. Whether you're buying, sharing, or whatever it is, there is always someone who is in the position whereby they are the organiser and are left waiting for rent, bills etc from the others. Sometimes it's late, but because you are such good friends, well, these things can be taken for granted to the point where it causes strain. When money comes into it, then it causes tension that can complicate a friendship. In the case above, I feel that parents getting involved in things makes it twenty times worse.

Crucially, both girls in question need to grow up and take a hold of their own lives.
 
Parent B would do exactly the same as parent A if the roles were reversed but with added strings on top <_<
 
The important thing is that the relationship between the girls is preserved and not threatened by the parents views on what is monetarily equitable.

I disagree with BJ and K to an extent. The girls can both still enjoy the freedoms and fun of college independently of the prudent decision to asset back Girl Bs future. I don't see anything in DOs post that indicates any further parental control or scrutiny.
 
I agree with Bobbyjo on a couple of points - firstly that I'm not entirely sure how wise it is to buy flats for offspring, especially for university purposes (chances are that after leaving uni they'll move away from the university town anyway) and secondly that the most sensible option IMO would be to treat girl A as a tenant and charge her the going rate for rent rather than half all the costs incurred by the flat which I would see an an unecessary complication.

Crikey, my parents wouldn't have dreamed of buying me a flat, certainly not for university - I was expected to work my way through uni anyway without having my living expenses paid for; several of my friends' parents paid all expenses for them rather than have their study distracted by having to work. Ironically out of all my friends my parents could easily have afforded to pay my way and buy me a flat - I often received inordinate amounts of grief from my peers for coming from a well-off family - but they left me to work my own way through life ever since leaving home at 18, something I prefer anyway. I still get grief from time to time which I find most amusing as I am pretty much the only one of my old teenage friends who hasn't been bought cars or given cash sums to use as a deposit on a house; I struggled along for long enough with large loans but I'm in a better position now than a lot of them, gained without any help! Of course that's another thing to think about DO - will your daughter be receiving flack from people for having parents that "pay for everything for her"? Just another thing to think about IMO.
 
How many students pay out of their own pockets for accommodation?

Halls of residence cost £3k-£4k per year. For that, they get the privilege of occupying the small, single room with washbasin and access to a communal kitchen for 25 weeks of the year. At other times they are required to vacate the premises to enable the university to re-let the property.

Paying rent elsewhere would be equally costly with no prospect of a return.

For the same outgoings, parents can secure a mortgage - it's unlikely the students can as they're unlikely to be earning enough or have sufficient credit ratings - and at least look forward to a return on their outgoings a few years down the line. The girls will take responsibility for looking after the flat and paying all the bills. They will have to find part-time work to do so. They will have their independence but neither wants to see herself as 'leaving home'.

Parent A was offered a partnership in the venture at the outset but claimed he couldn't do it. The other evening he offered to piggyback the deal and support it in full because then he'd be seeing something coming back a few years hence. Parent B rejected the offer. Parent A then told his estranged wife, with whom the daughter currently lives, that he was taking no more to do with it and that she and her daughter would have to finance it all themselves. The mother of girl A phoned the mother of girl B to say she was deeply saddened and embarrassed by her ex's attitude and behaviour and that girl A had been heartbroken by her father's stance. She insisted that the girls would share the flat as per parent B's proposals, so things seem to have calmed down a bit.

Parent B is concerned that he might be morally in the wrong to include insurance and factoring fees. He knows the financial plight of family A is close to desperate but the venture leaves his own family with next to no disposable income.
 
It depends on house prices as to how prudent it is . I know a few parents who did very well out of such an arrangement - rent from student friends paid the mortgage , their kid got free accommodation and they got a fat profit at the end !

Much student accommodation ( and I quickly exclude any owned and let by Krizon from this observation ) is in poor condition , let by avaricious landlords at high rents. University accommodation is now increasingly expensive.

Surely the only question here is what is the market rent for a room in a property of that size in that area and that is what Daughter A should pay.
 
Ardross has hit the nail on the head. The maximum rent girl A pays should be the market rate irrespective of whether or not the mortgage costs are more.She is simply a tenant. In the unlikely event that costs are less than market rate then there is room, but no obligation, for downward revision.

I don't see how helping in the provision of appropriate accommodation is meddling and being an optimist would hope to pass any capital gain to the student ( B in this case) at the end of the course, This would be a good incentive for the student to keep the place in good nick.
 
If the parents can afford to buy, I like the idea. If it were me though, I would make both daughters pay the same rent and treat the house as an investment, not a charity. You could offer a reduced rent so as to help them out and still cover a mortgage while the investment grows.

Giving your child free lodgings while at University is laudable but untimately self-defeating as University is when you need to learn to budget and if the parents don't cut some strings now, they may well end up paying more in the long run.
 
Originally posted by PDJ@Sep 17 2006, 01:38 PM
Giving your child free lodgings while at University is laudable but untimately self-defeating as University is when you need to learn to budget and if the parents don't cut some strings now, they may well end up paying more in the long run.
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People who didn't go to university need to learn to budget as well. I have almost got it sussed.
 
Agreed, tetley, I didn't mean it like that. Having 4 years of free lodgings instead of learning how to pay your own bills is a mistake and that is the point I was trying to make.
 
Sorry, DO but your logic escapes me entirely on this one - why on earth would you expect the other parents to pay half the costs of this flat/house? The only answer is that the other girl pays the market rate for rent for that type of property - which may or may not cover half the cost of your investment ex any legal costs etc. The fact that you have chosen to go without holidays for the next five years is entirely irrelevant - nor should you make assumptions about Parent A's wealth/financial circumstances, no matter how much you disike/disapprove of him and his new family. Which you obviously do. Otherwise why comment on his choice to send his other daughters to private school? Do you know for sure what he's going without (gosh, maybe no hols for the next 5 years...) in order to do so or the type of State school that they would otherwise have to attend?

If you wish to purchase a flat for your daughter as an investment - great - but that's what it is and, by paying you rent, the other girl is doing you a favour, not vice versa!

Not sure I regard it as a mistake per se with regards to giving them an easy life - if it were me, there would be strict requirements in place before shelling out that Daughter knew that the responsibility of 'owning' and maintaning her own property - rather than a rented one - was the flipside of having 'free' accommodation.

In hindsight, I reckon it's a positively good thing that only you are purchasing this property, because, while the girls have been good friends up until now, there is no guarantee they would remain so for the rest of their college life and there would be nothing worse than falling out and not being able to move out. And if you think that was an unlikely scenario, the first boyfriend on the scene that they both fancy will sort that one out.

Unless they're gay, of course.
 
Originally posted by Songsheet@Sep 17 2006, 04:01 PM
Sorry, DO but your logic escapes me entirely on this one - why on earth would you expect the other parents to pay half the costs of this flat/house? The only answer is that the other girl pays the market rate for rent for that type of property - which may or may not cover half the cost of your investment ex any legal costs etc. The fact that you have chosen to go without holidays for the next five years is entirely irrelevant - nor should you make assumptions about Parent A's wealth/financial circumstances, no matter how much you disike/disapprove of him and his new family. Which you obviously do. Otherwise why comment on his choice to send his other daughters to private school? Do you know for sure what he's going without (gosh, maybe no hols for the next 5 years...) in order to do so or the type of State school that they would otherwise have to attend?

If you wish to purchase a flat for your daughter as an investment - great - but that's what it is and, by paying you rent, the other girl is doing you a favour, not vice versa!

Not sure I regard it as a mistake per se with regards to giving them an easy life - if it were me, there would be strict requirements in place before shelling out that Daughter knew that the responsibility of 'owning' and maintaning her own property - rather than a rented one - was the flipside of having 'free' accommodation.

In hindsight, I reckon it's a positively good thing that only you are purchasing this property, because, while the girls have been good friends up until now, there is no guarantee they would remain so for the rest of their college life and there would be nothing worse than falling out and not being able to move out. And if you think that was an unlikely scenario, the first boyfriend on the scene that they both fancy will sort that one out.

Unless they're gay, of course.
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In which case the first girlfriend might cause the same problem :lol:
 
Originally posted by Songsheet@Sep 17 2006, 03:01 PM
Sorry, DO but your logic escapes me entirely on this one - why on earth would you expect the other parents to pay half the costs of this flat/house? The only answer is that the other girl pays the market rate for rent for that type of property - which may or may not cover half the cost of your investment ex any legal costs etc.
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What parents B are asking of parents A works out at about 10% less than half the cost of the let of an equivalent property, according to figures on letting agency websites.

Girl A has told her parents that she knows what other students are paying in the area (a little less than she is being asked to pay) but she doesn't say whether they're sharing a 3-bedroom property or possibly sharing a bedroom. Parents B were tempted to ask a letting company how much the property should let for and ask Parents A for half of that but they wanted to go down the route of transparency because the girls are so close. They felt they were offering a quality property (fairly new, well looked after, secure etc) with the added reassurance that she'd be sharing with a close friend rather than a total stranger and without seeking to profit in the short term. They wanted the girls to be together and they didn't want to leave themselves open to accusations of taking advantage of the girls' friendship.
 
DO - in your initial post, you said that the parents of the girls had discussed the possibility of them sharing, etc. At any point, did the parents ask the girls if that's what they preferred? And if they did, what was the girls' response? I still feel there's a deal of parental control inherent in this scenario of flat-buying. The non-owning girl is surely always going to feel in a lesser position, whereas in HoR or in a rented flat, the girls are at parity. And what are the financial and social ramifications if the girls, as has been already posited, drift apart or have a major falling-out? It strikes me that if it ain't broke, don't fix it, since the owning family could be stuck with their daughter looking for that 'stranger' to share with at some point, which is not what they envisaged.
 
Originally posted by Tout Seul@Sep 17 2006, 01:27 PM
Ardross has hit the nail on the head. The maximum rent girl A pays should be the market rate irrespective of whether or not the mortgage costs are more.She is simply a tenant.
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Which is precisely what I said in the first response to the question.
 
I have just read this again and I still can't for the life of me understand those people who are against parents (in general) investing in a property for student offspring.

There is some strange amateur psychology on here and some even stranger economics.

So, let's first start with a couple of assumptions - the parents I'm discussing are those fortunate enough to be able to support their children while at university and most students (and from my experience I'd put it at 90%+) want to get out of halls of residence as soon as local rules allow.

OK, so the parents will help their children by paying their rent for them. And that's where the decision on whether or not to purchase is a no-brainer. The size of the house, within reason, is irrelevant. Let's say "within reason" means from one to four bedrooms. Any bedrooms apart from the one - or more - which are nt required by the purchaser's offspring are let to other students, obviously preferably friends, at market rates. The amount paid in mortgage payments, less any rental income, is not going to be more than than forking out for rent to a landlord and the parent has the benefit of capital growth. At the end of the student's university life the house can be disposed of and the profit gained will help to offset the £20k to £30k that it will have cost the parent over the previous three years. Or, the house-owner may now have grown fond of being a landlord and wil continue to rent his property to students.

It really is as simple as that.
 
Originally posted by BrianH@Sep 18 2006, 02:16 AM
I have just read this again and I still can't for the life of me understand those people who are against parents (in general) investing in a property for student offspring.

There is some strange amateur psychology on here and some even stranger economics.

So, let's first start with a couple of assumptions - the parents I'm discussing are those fortunate enough to be able to support their children while at university and most students (and from my experience I'd put it at 90%+) want to get out of halls of residence as soon as local rules allow.

OK, so the parents will help their children by paying their rent for them. And that's where the decision on whether or not to purchase is a no-brainer. The size of the house, within reason, is irrelevant. Let's say "within reason" means from one to four bedrooms. Any bedrooms apart from the one - or more - which are nt required by the purchaser's offspring are let to other students, obviously preferably friends, at market rates. The amount paid in mortgage payments, less any rental income, is not going to be more than than forking out for rent to a landlord and the parent has the benefit of capital growth. At the end of the student's university life the house can be disposed of and the profit gained will help to offset the £20k to £30k that it will have cost the parent over the previous three years. Or, the house-owner may now have grown fond of being a landlord and wil continue to rent his property to students.

It really is as simple as that.
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Which is of course what I said earlier :P
 
James is right, of course.

I suppose the critical bit of info (unless I missed it!) is how big is the proposed property purchase? If it's two bedrooms and the market rate, as DO infers, is the same or indeed less than an equivalent property, then I also can'[t see what their hang-up is. However, if DO's property purchase is one that is above spec for the average student rental (because he doesn't want to see his daughter living in a doss-house, naturally enough), or has three plus bedrooms then the other girl's parents may well have cause to query the amount they would have to pay - as HoR or a less attractive rental might cost them less.

Brian - while I don't disagree with you re purchasing property for one's offspring while they are at Uni, the opposing view does have a basis of logic. Many university towns have now priced first time buyers out of the local market, (in the same way that coastal or other popular holiday locations have with second holiday home buyers) and it is becoming increasingly difficult for those on lower incomes to make that all important first time buy, because wealthy students are buying to let/invest.
 
I would calculate the amount based on mortgage, insurance and factors fees. Including the utility bills in the "rent" leaves Parent B open to abuse (Intentional or otherwise). Whether parent B decides to subsidise their daughter's utility bills is a separate matter.

Since they are getting 10% off a "normal" rent for the area, Parent A should be quite happy unless there is another reason for their displeasure. The two that spring to mind are that they haven't checked out how much it would cost and feel that the amount is excessive or that their nose is somehow out of joint despite their being asked if they wanted to come onboard early on.
 
My tuppence worth is this.

Sending a child to University is an expensive business. Parent A, from what I can gather is able to afford the Halls of Residence, but is struggling to pay anything significantly more than that. Although he sounds like he is being offered a bargain for the flat of 10% less than the going rate, it has not been stated whether this is significantly more than the amount he is currently paying. I assume it is, or there should be no issue.

Given parent B is anxious to have girl child of Parent A staying in the flat, he should not charge significantly more to Parent A than he currently pays for accomodation. If getting a fair financial return is more important, then entering into pressured negotiations should not have taken place.
 
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