Having children at home can be expensive, but paying for them to live away from home can be even more expensive. It is, therefore, little wonder that some parents try to reduce the costs of sending their child to university by purchasing a property for them to live in.
When the child graduates, the property can then be used as the parents see fit. Even though there are a lot of advantages to this arrangement (especially for parents who have more than one child at the same university at the same time), there are also some practicalities of which parents need to be aware.
Spending the first year in student halls can be key to learning the ropes of student life
While there are many places students can socialise, the fact remains that student halls are one of the best places for young adults to meet new friends and form a support network for university and often for life as a whole. Flatshares tend to happen in subsequent years, with many students preferring to be with friends/partners rather than completely alone. This means that while buying a property for your child to live in might make economic sense, it may not provide them with the best experience of university or be an optimum way of preparing them for future life.
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Student towns tend to be expensive locations even before transactions costs are factored in
As students are natural renters, student towns are often buy-to-let hotspots and, in keeping with the laws of supply and demand, competition amongst landlords helps to keep prices trending upwards. In addition to this, there will be upfront purchasing costs, almost certainly including the 3% surcharge on the purchase of a second (or subsequent) residential property. The longer you hold a property, the longer you will have for these costs to be absorbed by natural house-price inflation, but the length of a standard three-year degree course may not be long enough for this to happen.
Lets to family members are something of a grey zone in many ways
Even if you are theoretically letting out a property at a market rate, the fact is that lenders are well aware that family politics could make it very difficult for you to evict the tenant if they fell behind on the rent, especially if the tenant is your own child.
This means that mortgages on “family lets” tend to have more resemblance to standard residential mortgages than buy-to-let mortgages, which means that loan-to-vehicle ratios may be much smaller and lenders may wish to see evidence that you can afford the mortgage payments even without rental income.
On the other hand, local authorities may simply treat you as any other buy-to-let landlord and expect you to complete all relevant paperwork and comply with all relevant regulations and they are pretty much guaranteed to do so if you put a non-relative into the property (e.g. your child’s partner) and especially if you run the property as an HMO.
Hopwood House are specialists in property investment, with a wide range of investment opportunities in the student property investment and residential buy-to-let property markets throughout the UK.