HELP needed for investing in a student property.

flecker

RichyJ93 wrote: »

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!

It's in no way guaranteed - in fact it's very risky. Arguably, property is still in bubble territory and could fall for many, many years. Then again, it may not. Either way, they should factor the possibility of a substantial fall in property prices into their calculations and decide whether that's a risk they'd be happy to take.

In terms of income, they need to seriously look at all the outgoings involved in being a landlord (including taxes, void periods, repairs, insurance, the possibility of rising interest rates etc). Yield may not look so good then.

I'm highly debt- and risk-averse and, in this climate, I'd choose a student loan over a BTL any day.

00ec25

RichyJ93 wrote: »

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. !

they should:
a) read the thread on why not taking out a SLC loan is a waste of money
b) see someone who actually understands investing

there is NO guaranteed return - yes the rent should cover the running costs each year and property prices may well go up, but not within the timescale of your studenthood, so just how long do they intend to stick with being LL? Less than 5 years and they will be incredibly lucky to even break even after tax (Income and Capital Gains), repairs, safety checks , buying and selling fees, management fees and capital appreciation are taken into account.

-- Do they have the first idea what it means to let to students when it is not occupied by their son and the actual occupants don't care one jot about how the place is treated? Parents could have to spend £000 refurbishing it inbetween each let

pioneer22

Your parents are bonkers even Martin Lewis says that student loan debt is the best debt to have. That's why I was at uni for 6 years.

Give your parents a slap and man up.

Annisele

Presumably your parents didn't want to go into the student lettings business two years ago, or they'd have done it.

What has changed now? Sure, you're a student - but aiming to buy a property, be a landlord for two years and then sell the property is a recipe for losing money. They'd need serious house price inflation just to cover the costs. And there's a good chance the value of the property would fall.

However, from what you say it might be a good idea to get your parents to talk to a mortgage broker. If they can only get together £10k or so as a deposit, then that restricts their borrowing on a buy to let to £30k or so - and I doubt they can buy the sort of property they're looking at with £40k. If a mortgage broker tells them that, the idea may get quietly dropped.

There may be other options, for example borrowing against your parents' house rather than against the student flat. But, that still has the problem of trying to make a short term profit in a market they don't fully understand.

motherofstudents

Having to repay a student loan is no doubt something you would prefer not to but it is much more do-able than getting into a btl in the current financial climate. I know a lot of parents who have bought houses to let out to their kids and friends and the only way it can work is if they can afford it ! That is, have enough deposit and a contingency for the inevitable repairs etc. I'm not going to say students will trash the place, that's a real stereotype but there are always things that need fixing no matter who the tenants are. They really shouldn't be telling you not to have a student loan, discuss it yes, but it is your decision you're a grown up now ! Work hard, get a good degree and your loan repayments won't seem too bad.

dizziblonde

I went to uni with a fair few affluent young chaps and chapesses (was that sort of uni) and we had quite a few parents do similar in terms of buying a student house, kid living there and renting out the remaining rooms. It rarely ended well - the tendency to "pull rank" and play the "this is my house" card always surfaced in the middle of any squabbles about who'd left the coffee cup in the sink or the loo seat up and the houses inevitably ended up at each other's throats by the end of their time living together. At least for students in the standard living together and all renting setup - we were all equally skint and in it together!

Not financial-related but just a cautionary tale of human nature.

hazyjo

Really can't see how paying the interest on a large mortgage, along with all the expenses of being a LL, etc can be cheaper than a student loan! If they're that bothered about your debt, why don't they just give you money each month/year instead of you getting a loan?

Yes, they would have 'bricks and mortar' at the end of a mortgage, but, with prices dropping in most areas still, and with the amount of interest on a BTL mortgage (and don't forget if/when interest rates go up, that could be a whole lot worse), would they really end up getting back more than they've spent? And what happens if you want to change your course or Uni? Or once you've finished? Will they continue letting it to students? Good luck to them!

Jx

Beckyy

From what I can see your parents wouldn't be able to afford the deposit on a Buy To Let mortgage. Even if they could, being a andlord isn't smple and there would be a lot of expenses and outgoings. It doesn't seem like a sensible, or viable, plan.

They're better off letting you learn how to budget yourself. I would refuse their help - you're old enough to make your own decisions. They can't stop you from taking out a student loan.

PasturesNew

In some areas you can't just buy a place and let to students - Councils are increasingly requiring licenses for landlords to do this. And you'd need to check if it needed an HMO license. And then the flat itself might have restrictions in the leasehold saying it can't be sub-let which might not be a problem from day one, but if you need/decide to move on at the end of your course (for the job of your dreams) ... and they want to rent it to three new students.

Which Council would it be?