Grandmother loans funds to granddaughter. Granddaughter purchases a house in her name (from third party through lawyers, legally documented etc.). Granddaughter is a student and lives in house herself and charges student friends rent, the granddaughter also collects a nominal rent from herself. The granddaughter sets the level of rents.
Once a month total rents (including granddaughters) are added up and any expenses are deducted and the net amount is paid from the Granddaughter to the Grandmother.
If the property is sold (or re-mortgaged at some stage) then the Grandmother will receive her loan funds back in full and Granddaughter will be entitled to any increase in value.
I act for the Grandmother - question is the money she receives Rental Income or Interest?
I think it is interest at a variable rate but wanted to double check and see if people are in agreement or not, and if there is any other angle I am missing?
Thanks for any input you may have.