Buying for a student daughter

ElmoR

Does anyone have any experience, or know sources of information, around buying a second property for their student offspring?

We have no mortgage (paid it off), are in our 50s, good salary. Daughter has approx £30k from child trust/ISA savings and one year of a LISA. She's in a city with cheap property relative to the rest of the country (3 bed home = approx £150k-£200k). She has circle of friends also at uni who could be renters.

The other consideration is that we are completing probate for a parent (her grandparent) who passed away recently and there will be some inheritance but not until who knows when - probate solicitor says the process is taking 10-12 weeks at the moment and we only submitted paperwork 2 weeks ago.

Time pressure to factor in as well - place needs to be ready for the n=3 young people starting their next year of study in September 2023. They are anxious about having it in hand (as am I) because accommodation is already being signed up for now for the next academic year.

Do I buy a second property with a new mortgage and become a landlord? Joint buy with my daughter (she uses her savings and LISA for deposit?)? Doubt she can buy alone - no bank would give her a mortgage as a student? Buy in my name and then gift part if/when inheritance eventually arrives?

I go around and around wondering how to go about this

Any advice, suggestions, signposting to information, gladly received.

Thanks all

ElmoR

pinkshoes

For starters, houses are often long term purchases. I'm assuming your daughter is in her first year, then from next September will have 2 or 3 more years?

You then need to consider what will happen at the end of the degree. Are you likely to keep the house and continue letting it to students? Will your daughter stay in the city?

As students need to sort accommodation out well before September, then you will need to decide a definite yes or no now.

What is the availability of properties like in the city? Is there something suitable available on a regular basis?

lookstraightahead

I have a daughter who completed uni two years ago and is now working. She does not live by me, she does not live by her uni, she rents with a mix of new and old friends and will possibly she thinks, work abroad for a while at sone point. She has some inheritance which she will use for what she wants when she wants.

Would you really want to be Landlord to your daughters' friends, making the balance uneven? How about if in two years time she's offered the opportunity to do something amazing but needs some money? What if you become unable to manage financially, or your role as a landlord (which is no mean feat) becomes complex? What if one of her best friends doesn't pay?

Personally I would simplify this and get her to put her money away. If you want to help her with her rent that's fine (although she will only have to pay it back to the government when she can afford it).

Despite your best intentions this could be a ball and chain round everyone's ankles. 

UnderOffer

Let your daughter find a rental with her uni friends to a separate landlord and keep her savings.  Once she’s finished uni and has a job or knows where she’d like to be based then let her consider investment in her own home. 

macman

Some questions for you:.
Are you prepared to become a landlord, with all the many legal and statutory requirements involved? They will be your responsibility, even if you use an agent. About 80, last time I looked, and increasing every year.
As an existing property owner, any resale will attract CGT at your marginal rate.  
Is the property likely to appreciate enough to make this worthwhile, given that she will graduate in presumably two years? 
Is there compulsory LL licensing in the town in question? If so, another overhead.
Student occupied accommodation is likely to result in a high level of ongoing repairs and maintenance. Who is going to do this, and at what expense?
What rate of return have you calculated you can achieve, compared to perhaps a 5 year savings bond at near 5%, which requires no time or expense at all?

anselld

If you buy it you need to contend with becoming a Landlord plus the 3% additional SDLT on second property.

If she buys it or you buy jointly or you gift it to her she will lose her first time buyer benefits on a property that is unlikely to be suitable after she graduates.

Probably better for her to experience the normal student rental process.

silvercar

I wouldn't do this. Students don't make good landlords, the responsibility is too much and the learning curve to hard.

That said, once she has started on her career and settled where she wants to live, to help her out you could gift a deposit and go on the mortgage but not the property deeds. A few lenders will facilitate this.

diystarter7

OP
Simply rent a place. We have to be realistic and (no offecne) but who knows if your kid will jack in uni as some do.
Then what happens to the place afterwards
Property is often not a 1/3 year thing if you are not a developer.
Then their is looking after the building costs.
Then your daughter may want to travel etc.

The easy would and reduce stress is - rent and then invest or keep as savings for her future needs/choices/etc
About you and your money, you can buy something closer to home easier to manage if you really want to become a LL and with almost everything the t's favour these days, personally i'd not bother unless I was getting a big bargain

LegallyLandlord

I ageee with everyone else. Also bear in mind if there are 3 or more sharers, it’ll be an HMO, a House in Multiple Occupation. 

If you’re in an Article 4 Direction area, you’ll need planning permission from C3 residential use to C4, and that’s not easy. 

There are more rigorous rules for HMOs and if there are 5 or more sharers, you’ll need a licence. 

You can find out more here: 
https://theindependentlandlord.com/resources/property-investors-glossary/hmo/

Also, there are over 170 pieces of legislation that landlords need to follow. It’s not something to take on lightly. 

Here’s a first time landlord guide:
https://theindependentlandlord.com/new-landlords-guide/

The Renters Reform Bill is also going to make it even harder for student landlords as it’s likely that fixed term tenancies will be abolished. 

Unless you buy it with a company, you can’t set off the mortgage interest payments against profits: 

https://theindependentlandlord.com/is-a-limited-company-best-for-landlords/

The rules are due to change soon to make it compulsory for rental properties to be an EPC C. If it’s an older property, this could be expensive:

https://theindependentlandlord.com/epc-landlords/

You’d also need to decide who will manage the property. If you outsource, you lose 10-15% of your gross rent in fees: 

https://theindependentlandlord.com/self-managing-rental-properties/

Finally, also think whether this really is the best place to be a landlord. If you want a long term investment, with capital growth and income, this student town might not be the best place. 

I hope that helps. 

anselld

LegallyLandlord said:

Unless you buy it with a company, you can’t set off the mortgage interest payments against profits: 

https://theindependentlandlord.com/is-a-limited-company-best-for-landlords/

That is only partially true if the rental income takes you into the higher rate tax bracket.  (which is increasingly likely with the freeze on allowances).  However, even higher rate tax payers can still offset half of their mortgage interest.

SDLT_Geek

Some of the issues, including stamp duty land tax, are considered here: https://www.blakemorgan.co.uk/bank-of-mum-and-dad-university-purchase/