Buying property for son at University

Catblue

My brother in law did this for his daughter; the idea was that she'd share with 2 friends and live there for 3 years.

She stayed on the course for 6 weeks and then promptly quit. The other friends immediately found another place to live and the house has been up for sale for 6 months now. Looks like he'll make a substantial loss on it - he thinks £15K or so.

Worse is that his other daughter wants to go to university elsewhere - but guess what? He has absolutely no money to help her with rent or fees cos he blew everything they had on daughter 1. Not exactly a harmonious household at theirs at the moment.

What you say about the area that you are considering does concern me. Sounds like a drugs ghetto if you can get a 4 bed flat for £90K on the south coast. You really want to put your son there? Are you sure about that?

He could also find it hard to attract friends to pay to stay there. If your son does take on lodgers rather than tenants, then it is true that they have fewer rights. Equally, though - lodgers are able to move on more easily than tenants since they are not tied to a tenancy agreement. Your son could find it hard to keep his lodgers and the stress of finding new ones is probably one that he could do without in his first year. Even if he is just a normal landlord, collecting rent, dealing with repairs and maintenance, and making sure the lodgers don't trash the place that is still a lot of stress to put a young man under in my opinion. If his friends' parents are convinced that it is such a good idea then why aren't they buying places for their own children?

Also, if it is a dodgy area (as you seem to acknowledge) then obviously it will be difficult to make a profit when you come to sell in 3 years or so.

JQ.

This was a good idea when house values were rocketing year on year - today I don't think it sounds like such a good plan:

Costs :
Solicitors £1,000
Mortgage fees £1,000
Mortgage Interest £16,200 (£90k at 3 years at 6% - calulated over total as OP's deposit has an opportunity cost)
Maintenance / redecorating : £2,000
Costs of HMO £3,000 (I don't know much about this, but I'm guessing 5 fire doors at £500 each and a hard wired fire alarm)
Estate Agents fees on sale: £1,250
Furniture / white goods : £1,500
Insurance £1,000

Total cost over 3 years = £27,000
Total income = £18,000 - assuming 42 week lets at £600pcm

So, based on my very very rough estimates it will cost you £250pcm to buy the house and rent it over 3 years (£9,000). That of course does not factor in any drops in value over the period or any hold costs should it take 2 years to sell after your son has finished university. In the good old days, this would have worked as the house value would have probably gone up £30,000 over the period producing a very nice profit. I've also not factored in utility bills.

To a degree it should still work today, as alot of the costs highlighted above are fixed purchase and sale costs which when spread over a 15 year hold period become irrelevant. It does not work because you plan to sell after 3 years.

archersluck

As a student it's tough enough knowing how things will end up with your housemates, who to be honest you barely know when you agree to your houses in 2nd and 3rd year, and your landlord. Knowing that I'd only have the right of a lodger and that on top of that someone elses family would have all the power, well I wouldn't want to. Sure your son is lovely but if he's run out of cash and starts the whole "oh well its my parents house so you pay the gas bill this month" and similar...
What if his main group of friend is a gang of 5 and they want to live together? What if half of them leave for years abroad/industry? (might he be doing one of these?) or he wants a smaller quieter house in his final year? You say the areas not the best, what if the neighbours are a nightmare and his friends hate it and want to move out after a year?
All things to be considered. I know that if you're offering cheap rent them I'm sure the room will always get filled - But you want your son to be happy living with people who really want to be there, don't feel beholden to him and enjoy his company surely.
Just some things to think about from a human point of view rather than a property one.

Gleeful

We did this. Bought in 2002, sold in 2006 for twice what we paid for it.

Aside from having to live with some very crazy people in the form of my housemates and someone who left her stuff in the house for 6 months after moving out, I'd say it was successful.

k4kate

Thanks JQ for the assistance with figures - some food for thought there, and thanks Gleeful for your slightly more positive take on the situation

Have spoken to the council about HMO. The property would be classified as HMO but seeing as it has less than 3 floors and would have less than 5 tennants then it does not have to be registered. We would only have to follow basic tenancy principles with regards to safety in the house ie gas and electric checks etc.

You all make some good points about things that could go wrong and believe me, I am taking them on board but I am trying to retain a balanced view. My son and his friends have been studying A Levels together for the last 2 years so they are already good friends, not relative strangers. Ok, they've never lived together and I'm sure there will be "moments" but the I hoping the fact that they are all friends already and doing the same course will stand them in good stead. We have also made it clear to our son that if we do go ahead with the purchase then we will be expecting him to "stay the course" or find work down there if he doesn't do that. He already knows the area fairly well and has friends down there so I don't think we are being unreasonable and he is happy with this.

Not really sure whether to go via the BTL or dependants mortgage route, although a close look at all the the figures will probably give us more of an idea. Overall, BTL may be the safer option even if it is slightly more expensive.

lynzpower

Regardless of whether the property is a licensable HMO or not, overcrowding rules do apply. Check HHSRS guidance.

Basically a small room ( ie single) for a student is ok, as long as there are other areas to relax/ live in ie: lounge, dining room, large kitchen diner etc.

To get rid of the lounge by renting it out may well make you fall foul of the overcrowding regulations.

It is also pretty poor quality of life to rent a room when you have no lounge etc. There isnt even a garden for them to sit out in. It makes entertaining impossible and really impairs quality of life. I think you might find tenants would move out under these circs, me & my housemates did this then got out of the lease as soon as we could.

It can also contribute to other hazards such as fire, trip hazards etc.

So what im saying is, seek advice from your EHO as to whether the property is likely to be overcrowded under these circumstances.

k4kate

Thanks Lynz, I will check this out. Actual plan is to split the lounge/diner (20x10ft) to provide the extra bedroom so they still have a small lounge area (with balcony) and we would just do this with an easily reversible metal framed partition system with plaster board. I haven't mentioned this previously because obviously we would need to check lease conditions and speak to planning/building regs people to make sure this is possible.

HAMISH_MCTAVISH

Most of our friends have done this for their kids when they're in Uni.

I've yet to hear of it working out badly for any of them. OK, one did have their son drop out after a year, but they just rented the flat out. And have recently bought another as a BTL as the first is working out so well!!!

Great idea, and will almost certainly be a good move over the long term.

surreybased

I would echo the personal side of this. Life with your friends change when you start living together. Also the 1st year can be tough - students getting used to living solo and then having the responsibility of a house. It's a very big step so worh checking out the drop out rates from the course. It can be shockingly high.

Have an agreemnt in place for all eventualities - what if he falls out with his friends, would you agree to them moving out? would he be prepared to rent to other non friends lodgers?

brit1234

I would personally be careful of this. The tuition fee thing has to hit the price of student housing. There is a danger of bigger falls in value than other housing types. It has to be safer and cheaper just to pay there rent.