buying flat for student daughter at Uni - Scotla

cautious_mum

Hello, would appreciate some advice/opinions/experience on the following:
Basically have 3 children coming up to University age over next 5 years. Have one just started first year (Scotland) living in Halls making friends etc.
We've been thinking of buying a second property for some years but never really decided what to do. But now we would like to stop watching our savings decrease with inflation and instead of topping up her loan with the 3K a year they suggest, instead buy a flat and let her live there rent free, but pay the bills. We could rent the second bedroom out, which would help cover costs.
We have enough cash (just) to buy a flat outright near to the Uni (not the best flats, but not the worst either, basically on main road rather than quieter side roads), but wouldn't have enough to pay for the fees etc. on top.



So we were thinking of getting an offset mortgage of about 75K which would leave us with enough savings to do a substantial offset and use for fees etc.
We have had 2 offsets before on our main residence (both for 75K) and successfully paid them off over the years. Our current property has no mortgage on it (we managed to pay off the old offset mortgage off and buy this outright).

So, is it possible/do the banks allow, a re-mortgage on our main residence which we would then use to buy the flat, as this would be cheaper than a buy-to-let. Or would we be stuck with a buy to let?
We do not need to use rental payments to pay a mortgage, we can pay this with our own earnings.
The alternative is to have a mortgage to buy the flat, would this have to be a buy to let? It would have the reassurance of having a bank survey, so we would know that at least the bank thinks its worth the money. Having a survey on our main residence might be more problematic as it could effect resale value in the future as we know we need to do some maintenance, but haven't got round to it.
We're trying to keep the costs down, if it ends up having to be a buy to let mortgage, what if we don't let the other room in a couple of years time, as our next child is highly likely to live there as well?
What would you do? If a buy to let is the only way, is it worth the £400 a month we would get for renting the room? also should we get cracking as the new increased stamp duty comes in in April (?)



Note: we would be paying approx. 90K in cash for the flat and the rest as mortgage, or alternatively raising the money on our own house then using whatever cash we need to buy the flat. Technically we could use our own savings to buy the flat (if we clear out every penny) and then use the mortgage for fees/stamp duty etc.
The flat would be in our names, not the kids, also the rental payments would go to me, as my husband is a higher rate tax payer, whilst I work part time and don't earn enough to pay tax.
A final note: we can access 140K no problem, but 20K is tied in for another couple of years. The ok flats are around 145-155, the better flats 160 ish, the flats further away from the Uni about 130-140.


Ok, have had problems posting this, is the second time I've had to type it, so if any of it doesn't make sense or you need more facts, please let me know.
Thank you
Cautious Mum

silvercar

Shivers and shakes at the thought of my 18 year olds being responsible landlords.

Do your children want to live in a 2 bed property with 1 other person? Both mine wanted to live in halls for first year and then in shared houses with a few others. I think they would have found it hard to pick one person to share with. Also the utility costs are often higher when sharing with only one other, something that the sharer may consider as off putting.

booksurr

are the other 2 children going to go to the same uni? unlikely so are you going to buy for them as well?

personally I think a very important part of the uni experience is the life experience gained living together with friends made in the first year in halls and then moving out as a group. Some groups fall out (a life experience) some remain friends for life (a life experience!)

living in a small property owned by mum and dad stifles life experience - just my opinion as a graduate who is still friends with all those whom I lived with nearly 30 years ago and still see those in the UK at least once every year

she may end up marrying the other occupant of the 2 bed but I think her experience would be wider (better?) if she made her own choice where to live

cautious_mum

Flats seem to be very common way of renting after the first year. Not many houses for rent anyway. She has already been round with her best friend looking at flats to rent, we have spoken to her about it. Also several seem to be potentially good for converting the lounge, though not all the kitchens are big enough to do this (ie to turn kitchen into a communal lounge space as well as kitchen).


thanks for the quick reply. :-)


Her friend is frankly better at house stuff than she is!. Also we would just make her move out if she doesn't look after it properly. We can also visit unannounced if necessary.
We would be the landlord and she knows it. Worst comes to the worst, we let it out via the Uni and wait to see if the next sibling lives there. The rent she would be saving is more than what we are giving her now anyway. Utilities may be higher (we are looking into this) but again, tenement flats do seem to be the main rental for students. My husband has spoken to a friend whose kids graduated in the last few years and he said the one thing he regrets is not buying a flat. for them. I know other people who just spent their money paying their kids rents and the first flat we looked at it was the parents selling up after 8 years of their 2 children living there.


She is in Halls at the moment and we have told her siblings that they can do the same, (next one has one year of school left) . There is a good chance at least one of our other 2 will go to the same uni and if not we will either rent it out or look at it being a holiday/weekend place for us to escape them!

Andypandyboy

Yes, we fully intended to do this but our youngest has loved living with all his housemates so much that he wanted to share with all eight next year.....so plans were scuppered.

Also, we saw a lot of rental properties in his uni town with boards still up well into November (when we last looked) which made us wonder if supply was outstripping demand.

All of our kids have gone to different universities too, chosen for specific course content. I am not sure I would have liked to have needed or wanted to steer them to a university just because we had a flat there.

It is great if it works out for you, sadly, it hasn't for us!

Pixie5740

Do you know what is involved in being a landlord in Scotland? You'll have to apply to the local council to become a landlord and if you go down the route of letting a 3 bedroom property then you're into HMO territory.

Then there are changes in legislation that the Scottish government propose to introduce (not sure what stage this is at)

“Some of the key proposals include:-

(a) removal of the “no fault” grounds for repossessions which is currently available to all Landlords of Short Assured Tenancies. At present Landlords can reclaim their property simply because the fixed term has ended. The consultation document proposes the removal of this right for Landlords;

(b) the consultation proposes reducing the number of grounds under which a landlord can repossess their property from the current 17 grounds to 8 grounds. All these grounds would be mandatory (there would be no requirement to satisfy any court or tribunal that it is reasonable to repossess where the terms of the ground are met).

The proposed new grounds are:-

(i) a landlord wants to sell the home;
(ii) mortgage Lender wants to sell the home;
(iii) landlord wants to move into the home;
(iv) landlord wants to carry out refurbishment;
(v) change to the use of the home;
(vi) the tenant has failed to pay 3 months’ rent;
(vii) the tenant is anti-social; and
(viii) the tenant has otherwise breached the Tenancy Agreement.

I have no idea about the mortgage situation. I do know from a personal perspective that when letting a property as a student I wanted somewhere where we would all be tenants (equal) rather than renting from someone's parents.

cautious_mum

booksurr,


she hasn't got a clue what to do next year, her friend is looking for a flat, so she is too. In 'halls' They keep them in small blocks of flats, with only 3 or 5 other students anyway. Its changed alot since my day when you shared in big halls on long corridors with 20+ other students. I was surprised. when we looked round all the Unis at how they are phasing out the old communal stuff.


Its all about small self catered flat units these days. But I know what you mean, I'm still friends after all these years with my Uni friends too.


She has met plenty of people and a lot of them commute these days anyway. So providing they all stay in Halls in the first year, I don't think it's much of an issue. She has met people at clubs and the Union as well.

cautious_mum

Thanks Andypandyboy
We are only considering it as she is thinking along these lines anyway. We are aware the other 2 may go elsewhere, but as they are stuck applying to Scottish Unis and they all desperately miss living in London/near London, they are all wanting city life again, so unless Edinburgh makes them offers I think it is highly likely that they will end up at Glasgow. But even if not, we would like a place and were looking at Edinburgh before (can't afford a reasonable flat there).


Thanks Pixie, that is really useful. We wouldn't convert the lounge to begin with anyway. Also most students only want to live till the end of the academic year so hopefully we wouldn't have too much trouble getting them out. But this is something we do need to take into account. Was wondering if the Uni has help on this, I'll be looking for forums on their website I think.

theartfullodger

Note Pixie's wise comments...

Most/many experienced landlords would say, never rent to friends & family ..

Certainly only ever rent to someone you are happy to evict, with TV, local papers & court case & never speaking to them again to your dying day if they fail to pay rent, cause damage or behave badly: Oh yes, in Scotland the landlord can be responsible for tenant's anti-social behaviour: Students? What do they do.....

If you rent to her & she has lodgers she would need to declare that income to tax-man & benefits agencies, as required. Note that in Scotland unlike in Engerland if you have "lodgers" and things break down & you want them out the landlord (who would be daughter as far as lodger is concerned) would need a court order.

If renting to all occupants - well, that's fun with students...

If you decide to go ahead join SaL
https://www.scottishlandlords.com/
& do the then-free courses from LaS..
http://www.landlordaccreditationscotland.com/

My advice?? Become a landlord & make money (usually - but not always..) renting to complete strangers, but support your kids in any places they rent...

cautious_mum

thanks artfullodger,
The flat will be ours, the rent it makes will be my income, not hers. So I'll be declaring it.
Would only rent out to students completely if Uni has one of those approved landlord schemes, but would need to look into that. The alternative has been to buy locally to us and rent it out longer term (not students) or do a holiday let. Neither of which we have managed to make the jump.


The other alternative is to not rent it at all, just to let her live there and it be 'our flat'/holiday flat. We are also considering one bed flats (with possibility to convert lounge, but aren't much cheaper).


Will certainly look at the links and do the course. :-) Would help us generally if we wimp out and don't do it after all.
Am also concerned about increased stamp duty on costs.

cautious_mum

Does anyone have any advice on the mortgage/money questions I put originally? These are relevant even if we wimp out of the student flat idea.


Frankly if we don't buy something soon we'll need to decide on something else, as we've been dithering for 5 years now.. Buying property and letting it out/holiday lets is a popular investment tool locally, but I'm concerned about the problems with the oil industry locally to us, we may have problems selling in years to come. Where-as at least with the major cities in Scotland they aren't 'one trick ponies' like Aberdeen.


So if you all think student flats for your kids is a no-no, do you have any better ideas?