To Rent or Buy?

MaryT42

My son, 23, inherited a large sum of money from his father; most of it is still sitting in various bank accounts.

In September he will start a 1-year, full-time post-graduate course in London. There is no designated ‘student accommodation’ associated with his course/level of study. He plans, with a friend from uni, to find shared rented accommodation. It looks like they will each have to pay upwards of £550 + bills pcm; possibly, rather more.

IF my son could find a suitable property for sale AND come up with the asking price (ie, no mortgage), would he be better off buying than renting? A trawl of internet sales sites brings up a range of two-bedroom properties which, with some financial assistance from myself - either as an interest-free loan, or as an ‘early inheritance’ payment - my son could just about afford to buy outright, although it would pretty much wipe out his reserves except for just about enough for modest living expenses for a year or so. The rental income from the 2nd bedroom (from his friend, or someone else) would in the first instance go towards bills/utilities/insurance etc.

I would expect that my son would plan to live in the property (and rent out the 2nd bedroom) for a minimum of two years – during the second of which, hopefully, he will begin earning an income, although probably modest/sporadic at first. Thereafter, he might choose to (a) sell (b) stay on in the property (c) rent it out at market rates.

Can anyone advise on the best course in these circumstances? I would be
very grateful for any input.

BitterAndTwisted

I think your son would be better off renting while he's studying. Who knows where his career might take him and that may not include living in London any longer. A property is a huge tie.

pmlindyloo

Another one in favour of is renting.

I can understand the reasoning behind this - why pay rent when you could live in your own house rent free?

However, while this may seem a good idea in the short term I would be wary of the long term implications.

My first thought is that to buy a house/flat and get everything sorted by September is cutting it a bit fine (not to mention the stress!)

My second thought (and I speak from experience here!) really echoes Bitterand Twisted thoughts.
Young people may think they will do this and that but in reality it doesn't work out that way. Your son may suddenly decide to take a gap year or meet a girl and go off to another part of the country (or indeed do it without meeting a girl!) Will he then want all the hassle involved in renting out a property? I'm sure he doesn't realise what is involved (have a read of the sticky at the top for more information). Would it be easy to sell?

I would concentrate on making sure he has put his money into appropriate savings accounts.

Just my opinion!

hazyjo

Renting! Reasons above, mainly.

There were a couple of very similar threads recently if you can find them.

Jx

Annisele

Another vote for renting, for the same reasons as everyone else.

Your son only really has definite plans for a year - if he buys, then he might feel that he can't accept a job at the other end of the country/go travelling.

bristol_pilot

He is starting a one-year course. Just the process of choosing, offering and completing the purchase of a flat could take up to one third of that time.

Another one for renting.

heathcote123

It's a bit of a punt isn't it?

The length of his course, the future direction of his life etc would suggest renting.

But who know's - he could effectively have a free education if London house prices continue to rise over that timeframe. London is probably about the best place you can be for starting out in most careers, so I'd guess theres a good chance he'll stay there.

Bit of a gamble really, I'd guess in most 3 year periods he'd come out well up.. but 1 yr is abit short really if he does decide to move on - going to lose a bit in transaction costs.

The_Palmist

Put the money in a high interest fixed bond for a minimum of three years. This will give you and your son ample time to figure out what to do, where to buy etc. Your son needs to concentrate on his studies and finding a job after that. Money should be given to him once he starts supporting himself.
Keep in mind money can be spent a lot quicker than you can imagine.

p.s. Sorry for your loss.