Buy-to-let

If your child simply cannot afford to get on the property ladder – even with your help – then you could consider buying a second property yourself and allowing them to live there, rent-free or otherwise. This option is especially common among parents whose children are going to university.

There are obvious benefits for parents; as well as helping their child, they also have the potential to earn an income from the rent, and assuming they retain the property for a certain period of time, they could also make a capital gain.

But this option should not be entered into lightly. Buying a buy-to-let property should be seen as a long-term investment, and (unless you have the cash to buy one outright) might also mean taking on more debt in later life.

“This is a long-term commitment, and the ultimate motive for doing this should be to invest in property,” says Hollingworth. “If your child later wants to move out, you may need to rent it out to strangers, and take on all the advantages and disadvantages of being a landlord.”

Of course, you could sell-up when your child decides to move out, but this leaves you at risk of making a capital loss on the property.

There are also tax implications in buy-to-let; for a start, you face paying income tax on the rental income, and as the property isn’t your main residence, you also face paying capital gains tax when you come to sell. It will also be counted as part of your estate for inheritance tax purposes.

There are a number ways to mitigate your tax liability and it's worth speaking to an independent financial adviser for advice.

Finally, getting a buy-to-let mortgage isn’t as easy in the current climate as it has been in the past. Fewer lenders offer this type of loan, and rates can make it an expensive way to borrow. Plus, because you’ll be renting to a family member, your mortgage will be regulated (most buy-to-let loans aren’t currently regulated by the Financial Services Authority) which might mean less choice of competitive products.