Buying a flat for a student daughter

mindermum

My daughter is in her first year of university. I would like to buy a flat for her to live in for the following 3 years. I'm not sure if I should go for a one bedroom or would it make sense to get a 2 bedroom and rent out the other room?
What would be the implications of this? Also can I get a straight-forward mortgage, or would I have to get a buy to let mortgage?

G_M

Assuming the flat is to be yours (not hers), then yes, you'd need a BTL mortgage. If hers, would she qualify for a mortgage at all?

You'd be her landlord. Many BTL mortgages prohibit letting to family.

As the property would not be your primary residence, it would be subject to Capital Gains Tax on sale.

If 2 bedroom, you could either let the other room yourself, and have a 2nd tenant paying rent to you, or she could sublet the room (to a lodger) and she's receive the rent. If she sublet, the lodger would have fewer rights. If the lodger's rent was below £4250 pa, she'd have no tax to pay (£7,500 from 5/4/16). If above, she'd have to declare the income (and tax would depend on her total income).

As a LL, you'd have to declare tax.

see:

* New landlords: advice, information & links

Pixie5740

Is your daughter likely to remain in the university town/city after she finishes her course? If not then it doesn't make financial sense to buy somewhere instead of just letting her rent for 3 years. Not unless you want to continue being a landlord after she finishes university.

libf

Better to let her have a proper university experience and rent with fellow students, so that she can learn to fend for herself.

Cisco001

I will get 2 bed and rent one room out to a lodger.

I assuming you are not asking her to pay rent in return she looking after the place + paying all related bills?

ManuelG

Pixie5740 wrote: »

Is your daughter likely to remain in the university town/city after she finishes her course? If not then it doesn't make financial sense to buy somewhere instead of just letting her rent for 3 years. Not unless you want to continue being a landlord after she finishes university.

Yup. Buy somewhere where you'd want to let it out long term, let it out to AN Other... and use any rent gained to pay (towards) the daughter's rent seems sensible to me.

foxy-stoat

If its just for 3 years then buying and selling fees, ground rent, maintence and refurbishing costs would probably be more than the rent for 3 years.

If your doing it for security and an investment past 3 years then go for it, but as stated, normal BTL mortgages do not allow you to let to family.

silvercar

Many options. Putting it in her name either using help to buy to fund the deposit or guarantor mortgage through for example virgin money.

If you do it in your name you will probably need a residential mortgage as you are letting to family, so would need to show you can afford it without rental income.

If uni town is cheap, I would be tempted to get a small house and rent to your daughter plus 3 others. Students generally like living in groups.

fashionvictim

silvercar wrote: »

If uni town is cheap, I would be tempted to get a small house and rent to your daughter plus 3 others. Students generally like living in groups.

Yes but whilst your daughter might take care of the flat I doubt the other would care so much. Could cause a big headache for her. A lot of students ruin things,they do not have the time or money to clean. I guess it really depends on the uni & area.

I never think of one beds as ideal, but a cheap studio flat or 1 bed starter house could work here.

booksurr

buying a 1 bed, be it studio or flat, would be a mistake as it would wreck your daughter's chances of having a "normal" university experience wherein at some point in time she will almost certainly have a group of friends she may want to live together with and thus gain valuable life experience from so doing

buying a 2 bed would similarly be limiting her life experience

if your rationale for buying a property is you think paying her rent for her would be dead money then I think your viewpoint will give her a distorted uni experience

if your rationale for purchase is you think owning will be cheaper than renting I suggest you need to do a lot more research on the property market in that uni location, eg:
- how have prices changed in the last 3 years, would that increase have covered the buying and selling costs plus CGT?

- will the income cover the running costs + income tax?

- do you want to be a LL when you are not in the area and able to respond to problems?

- if you make her the owner to remove tax liability etc will she really want to live in a 1 or 2 bed property for 3 years and be a LL herself? I certainly didn't and welcomed a move into a house with my mates (who have remained friends for life as a result)

mindermum

I am so glad a posted this question. It is obviously much more complex than I first thought, and has given me a lot to think about. Thank you for all your advice.