Student buy to let property as an investment.

Andypandyboy

We have a child going off to University in September. For the first year she will live in halls, but subsequently will move out into private rented. We are looking at buying a 3 bed terrace with 2 receptions and making it into a 4 bedder.

The going rate for student rental is £400pcm in the area concerned. So income of £1200 plus not having to pay her rent of £400 pcm is the driver. She is on a four year course so hopefully will have friends to team up with, this will populate the house for the 3 years. We do intend to keep the house after she graduates, or that is the plan at the moment.

We are looking at properties which are already set up and so meet HMO rules.

We intend to do a lot of research into favoured areas, availability of rentals/ transport links/amenities. I will look for a house with similar sized bedrooms as equality of space is key.

We will also use an agent to sort the guarantor/deposit issues/hold keys.

We live within reasonable travelling distance of the city concerned so that is not an issue.

I am looking for advice/input from anyone who has done this for an offspring but with an eye to the future as an income.

What are the pitfalls? How do you choose an agent? Anything to look for in particular when choosing a house for this purpose?

jimjames

Main difficulty I can see is having friends rent and issues that might cause.

Overall seems a good idea and something I'd look to do when my kids get to that age and uni.

jennyjenssen1990

No I haven't done this kind of experiment but this sounds good and would like to do in future.

buglawton

If you are buying for cash it seems a good idea. If any kind of mortgage is needed then most BTL lenders will refuse based on a relative planning to live in the property. There might be some specialist lenders but their interest rates won't be as competitive.

bertpalmer

My wife's parents did this for her at uni. They bought outright a 3 bed terraced house for her in year 3. I moved in with her and also a friend. They put it in her name to help with inheritance tax later down the road.

Since letting it out and not living in it, she has left it to a letting agent to handle. It gives her a good income which now helps pay for her side of the mortgage.

I wasn't involved in any of the decisions - but you do have to run it like a business. It's not hassle free and does require regular maintenance and updates. She has a letting agent for about 9% who helps find new student tenants but doesn't do any maintenance. They did used to cover maintenance for 12% but they always had to check with her first before carrying anything out which seemed a little pointless.

They bought a really nice house - as opposed to a normal 'run down student' house. Because it all looked to nice we made extra efforts to look after it. She also enforced this. The grubby house we rented in year 2 didn't get a massive amount of cleaning.

magpiecottage

Unless your daughter will be confined to less than 40% of the property this will count as a residential (and thus regulated) mortgage.

The fact that there will be four residents does not mean she is only living in 25% of it because there are communal areas.

So it can be done but it might be best to talk to an independent mortgage broker.

TheTracker

I'd put the capital in the general stock market and set up a standing order of £400/month to her. For my child, the plan is to encourage work alongside study and I'll match 1:1 what she earns.

You are venturing into BTL and having a student age daughter reside in the property doesn't make it much more attractive in my opinion.

collingbone614

The hassle-factor would be quite high. I'm sure you know how these things happen, but some of the things I saw whilst living in student houses:

- Someone left an oven on when there was no one in and a significant part of the kitchen was destroyed in a fire

- Large, destructive parties were held and one occasion a local smack dealer invited himself after climbing over the garden fence

- As a result of above, quantities of vomit had to be removed from walls and carpets. Carpets were replaced quite often due to booze on floor

- Locks were changed on internal doors to make it difficult for people to access

- White goods were tampered with and damaged by a student moving out on non-amicable terms

- Students routinely tried to avoid paying rent, routinely cancelled DDs, disappeared out of the back door when the landlord showed up in person

- Students used bin bags and fabric to cover windows so agents and landlords couldn't see in

You might think that this wouldn't happen if you have brought up a child with good behaviour and values. However, the above situations all involved middle-class students with money, who had families with money. All of this happened at a good university.

I wouldn't underestimate how pointlessly destructive students can be.

Andypandyboy

buglawton wrote: »

If you are buying for cash it seems a good idea. If any kind of mortgage is needed then most BTL lenders will refuse based on a relative planning to live in the property. There might be some specialist lenders but their interest rates won't be as competitive.

That is interesting. We would need a mortgage. We may buy prior to our daughter living there, and rent out to other students first.

Do you have any more info on this relative rule? Thank you for bringing this up.

Andypandyboy

magpiecottage wrote: »

Unless your daughter will be confined to less than 40% of the property this will count as a residential (and thus regulated) mortgage.

The fact that there will be four residents does not mean she is only living in 25% of it because there are communal areas.

So it can be done but it might be best to talk to an independent mortgage broker.

I don't really understand the difference between the types of mortgages in terms of nuances aside from interest rates. Do they differ substantially in other ways?

anoncol

I have heard people successfully do this. Its not a new idea. If you have the money i say go for it. But dont forget your will be a landlord unless you pay a letting agency. So repairs etc will be needed.