Generating income from property

[miniman]

My Grandmother is about to go into a care home due to declining mental health. We need to figure out how best to fund this. Her house is worth approx £200k, and my mother has her own house which is worth approx £350k. Ideally, I would like to work out a way by which we can retain both properties so, in the fullness of time, my mother can sell her place and move in to the other house with a decent retirement fund in the bank.

Care home costs are approx £2000 / month or thereabouts.

My Grandmother also has some fairly substantial savings.

My ideas are:

1. Rent out her house (approx £800 / month) and top this up with the savings to achieve the £2k / month. This will only work for as long as the savings last.

2. Mortgage her house on an interest-only basis for, say £150k, and rent it out, using the rental income to pay the mortgage. The lump sum can then be used to fund the care home and potentially invested somewhere where it will generate some growth but still be readily accessible. In the fullness of time, the mortgage can be cleared via the sale of one or other properties.

3. Simply sell her house now.

I am leaning towards option 2, as the value of the house will continue to increase over time, and I would prefer my mother to benefit from this.

Any thoughts??? :)