HELP needed for investing in a student property.

RichyJ93

University student here,

Parents don't want me to get into debt and have thus stopped me from taking out a student loan and moving out into university accommodation.

The idea was second year they would buy a three bedroomed flat, rent the two remaining rooms out and use the property as a long term investment.

Average price of a three bedroomed maisonette is around £160-170k.

The problem being is the bank requires a 10% deposit on the price of the house (£16k) which is roughly £4-5k too much.

What advice do you have to get around this issue without leading to too much debt?

Thanks.

GDB2222

In order to reduce your student debt by a few £k, your parents want to take out a mortgage for £160k? Is that the plan?

mjdh1957

Surely if you're a student you're over 18 and so your parents can't stop you doing anything (unless they physically restrain you).

sooz

GDB it's an iiinvveeeeestment
As everyone knows house prices only go up.
And being a landlord is easy. Students are the easiest tenants.


OP if your parents own the property, rather than you, it'll be an HMO- rented to 3 non related individuals. And in a student area, that's very likely to need a licence.

G_M

I doubt they can get a buy-to-let mortgage on a 10% deposit. 25% is normal.

You do realise mum/dad will be landlords? And need to declare rental income for tax? And..... and...... and....

They could of course put the property in your name and you then get in lodgers as opposed to tenants, assuming they are happy to do so. And assuming you can get a £160K mortgage.

Acc72

RichyJ93 wrote: »

The problem being is the bank requires a 10% deposit on the price of the house (£16k) which is roughly £4-5k too much.

So your parents have got £11k and they are going to skint themselves for this ?

00ec25

If your parents cannot raise what is, in the grand scheme of things, a trivial sum of money (extra £5k) then how do they expect to run the rental?

LL’s should always have a decent sum of money as a contingency, it appears your parents have insufficient money to start with if they can’t even fund the initial deposit let alone have some for a rainy day

Your (their?) conviction that you should not have a student debt (by which I mean taking loans from the SLC not commercial debts from elsewhere) is also suspect – you should read the advice on why it is actually more cost effective / better investment to take on student debt now rather than use cash to emerge from uni debt free – see thread

http://www.moneysavingexpert.com/students/should-i-get-student-loan

angrypirate

Thing would be to have the mortgage in your name with your parents being guarantors on the mortgage. Being a student, you would have minimal income tax to pay on the rental income and being in the flat yourself would mean that you have 2 lodgers, not tenants. That way you dont need a BTL mortgage and you may be able to get round the deposit issue

RichyJ93

Appreciate the feedback.

Both are adamant that taking out a student loan would be a wrong move and that, yes, by taking out a 160k mortgage would be a large outflow of cash there would be a guaranteed return in the long run.

I feel as though I'm in the dark at the moment on this area so any more feedback would be great!

dimbo61

As a student there is no way you would get a mortgage
Mum and Dad can get a mortgage if they can afford too.
Do they have a mortgage on the family home ?
Do they have savings to put down as a deposit ?
Income to pay a £145K mortgage or 25% deposit for a BTL mortgage and a buisness plan!
Unless the " Bank of Mum and Dad " can pay for you to go through UNI its the student loan company like most students.
If you want to reduce your debts then get a job and live somewhere cheap

BitterAndTwisted

There is no "guaranteed return" especially for people who can't afford to buy the property in the first place and do not have the cash-reserves to weather the storm should anything need to be done to the property or they end up with deadbeat student tenants who go running back to Mummy and Daddy after the first term leaving the rent unpaid.

Student loans are the cheapest form of borrowing, which would put the interest-rate on a Buy-To-Let mortgage in the shade. I think your parents need their heads examining. Or you do, for even thinking that his could be a good long-term plan.

You've only got two more years at Uni, so they are going to make zero, nada, zilch on any property price-increases in that short space of time. They could just about cover all the expenses of buying and selling the property if they're lucky. Possibly not even that once they've paid income-tax on the rent.