Student accommodation: should you buy or rent a property for your children?
If you can afford it, buying a property for your children to live in while they’re at university or college can be a good move. Many university towns and cities have enjoyed positive, steady growth in house prices and the student population has been growing UK-wide. However, there are some things to consider carefully.
A long-term investment
Given the cost of buying an investment property – legal and financial fees, survey, stamp duty, possible refurbishment - buying and selling again within a few years hardly ever makes financial sense. So it’s sensible to look at buying somewhere as a medium to long-term investment and keep letting it after your children have graduated and moved on.
That means you need to look beyond the needs of your immediate family and make sure you buy something that will appeal to other students and potentially other tenant types. A good place to start is by visiting your local Your Move branch where we can give you some advice on local demand and what type of property is in shorter supply.
Check the market
Of course, not every area within every city is performing well, so you’ll obviously need to do some research into local property prices before you buy. The house price data we publish every month will show you how things are changing on a monthly and annual basis for each county, unitary authority and London borough, but if you call into your nearest branch, we’ll be able to give you some more specific local information.
House your children’s friends too!
If you buy a larger property and rent rooms to friends of your children as well, their rent should cover the mortgage payments and give you some monthly profit as well – even once you’ve taken off maintenance costs and allowed for tax. Be aware that if you’re planning to have five or more sharers, the property will be considered an House in Multiple Occupation (HMO) when the law changes in October and you’ll need to apply for a licence. So:
- Check the local authority’s House in Multiple Occupation policy. Some won’t allow in certain areas, either because they’re not considered suitable for the neighbourhood or because they feel there are too many in one area. Talk to the housing and planning departments to make sure you understand their regulations and licensing policy.
- Be prepared to invest more capital into the property, to make sure it meets all the fire and other health and safety regulations.
If you’re letting to a group of students, even though that includes your own child or children, have them all sign an Assured Shorthold Tenancy (AST) and pay a deposit. It’s also highly advisable to have their parents sign a guarantor agreement. While everyone might start the year as friends, things can change, and you don’t want to find yourself with a couple of empty rooms and unable to chase rent from people that have left. If you’ve taken out a Buy to Let mortgage, make sure the lender is happy to loan money based on renting to family and have everyone sign a ‘jointly and severally liable’ Assured Shorthold Tenancy is likely to be a condition of the loan.
A smaller investment
You might not worry too much about the rent covering mortgage payments or getting any extra income while your children are studying, so you could simply buy a small flat just for them. As long as you do your research and take professional advice when deciding what to buy, that could also be a good long-term investment.
What about renting?
Of course, if buying either isn’t an option or doesn’t seem to make good financial sense for you, you’re looking at renting. Although most students living away from home tend to go into university accommodation for the first year, it often works out cheaper to move into a shared house in the Private Rented Sector after that. The good news is that the quality of student houses has transformed over recent years. Many landlords – particularly those who have children of their own - offer very modern, secure accommodation with en-suite rooms and excellent WiFi.
Take recommendations from the student accommodation office and of course your local Your Move branch will be able to help.