All over the country new undergraduates are settling into their new homes but as I always seem to be at this time of year, I think many students and parents are missing a trick by not looking at buying a house during their time at university.
For the vast majority of young people, it is their first taste of independent life and their first glimpse of the reality of renting – watching hundreds of pounds of their own money disappearing into someone else’s pocket.
Of course, many students simply want to concentrate on their studies during their time away without the extra hassle of being a property owner but in these days of high student loans and the ever-increasing challenge young people getting onto the property ladder, it is an option that deserves serious consideration.
On the face of it, it certainly makes very good sense. Why pay rent when, either by working alone or clubbing together with friends, you can invest in bricks and mortar so that, when it’s time for you to leave, any profit you make (typically in the region of 8% a year) can be used on a next property?
If you are a parent, why not own or part-own a home for your child, giving you the peace of mind to know that they are not paying dead money to an unknown landlord and are instead living in – and looking after – your investment on your behalf?
You can also enable your child to live rent-free by opening up the other rooms to rent to other students, thus covering the mortgage and helping to push up the annual profit.
Currently, there are mortgages out there which allow you to do this thanks to some surprisingly affordable interest rates, helped by the fact that student housing is often in the more affordable areas of a city or town, meaning you will only need a relatively small deposit.
Of course, this is not an undertaking to be taken lightly and, bearing the extra work needed to advertise for additional tenants to your child, vet their applications and collect their rent, it is not for everybody.
There are conditions too. If the students want to be the only name on the mortgage, they must have a guarantor, usually their parents, even if they have a list of willing tenants lined up and ready to pay their bills.
The lender needs to give permission for the borrower to rent out rooms, if that is the intention, and few lenders will hand over the money for properties in buildings of more than three storeys or for former local authority homes. However, there are lenders out there who will potentially lend on that type of property so it’s certainly worth contacting us to find out more.
The number of tenants should also be four or less to avoid moving into the territory of owning a large house in multiple occupation, which requires planning permission and fire safety certificates and so on.
Interested? It is never too early to get onto the property ladder or purchase an investment property, so get in touch. We’ll run through the options and outline the risks, so contact us by using our quick enquiry form or by calling 01332 821 340.