Parents' guide to student buy-to-let properties

If your children are off to university, investing in a flat for them could be a bright move for all. We offer a parent’s guide to college buy-to-lets

This may become the best investment you’ll ever make. And if your son or daughter is heading to university this year, it will also buy you priceless peace of mind.

Instead of wasting money on rent, canny parents are snapping up new-build buy-to-let properties near their child’s college. They earn through renting rooms to other students, and stand a high chance of securing capital appreciation when they eventually sell.
Student numbers are growing dramatically, too. According to the university admissions service Ucas, at least 413,000 school-leavers will start their first degrees this autumn.
Now the property investment firm London Central Portfolio says students have taken over from people working in finance as the biggest tenant market in the capital.
But the Money Charity is warning that today’s students suffer a cost-of-living crisis. It has surveyed accommodation near 150 universities – and found it to be of poor quality and expensive. So here are 10 tips to avoid that worry and invest in your child’s future in a booming market.

1 Go new
Buying an old house, maximising the number of bedrooms and squeezing in lots of students, Men Behaving Badly-style, is no longer good enough. Students now demand high-quality fittings, en suite bathrooms, Wi-Fi and even parking.
2 Buy near the college
Few colleges allow student parking, so accommodation on bus routes or within walking distance is perfect. New-builds are usually located away from densely packed terraced residential areas and closer to public transport routes.

3 Consider the long term

“A one-bed studio will be cheapest, but a two-bed flat means you can earn extra rent by letting to another person. It also increases your long-term rental or resale opportunities to include professional couples or young families,” says Location, Location, Location property guru Phil Spencer.

4 Avoid quirky properties

Some experts think that buying individual rooms or “pods” in a block may be too risky. “Student pods are not considered individual properties and therefore cannot be bought using a mortgage,” says Mish Liyanage of property investment specialists the Mistoria Group. He says buyers should stick to mainstream apartments.

5 Budget carefully

Find the right mortgage through a broker such as charcol.co.uk or comparison site such as moneyfacts.co.uk. Don’t forget that most lenders demand 40 per cent deposits before offering the interest-only mortgages that are best for buy-to-let investors. They also expect rental income to be 125 per cent of the mortgage.

6 Fixtures and fittings

New-build homes are likely to have high-quality landlord-friendly fixtures such as easy-to-replace kitchen worktops, cupboard doors and vinyl floors. If you buy off-plan with a choice of extras, ask for window locks, durable decking and a bike shed. And remember – students are hard on furniture, so budget to replace some items every two years.

7 Target your student renter

Your son and daughter may return to your family between terms, but let that second bedroom to an overseas student, and you may well guarantee year-round income. This will increase your yield – the proportion of the property’s purchase price secured annually in rent. John Heron of specialist lender Paragon Mortgages says: “There are generally low arrears, as tenancy agreements often benefit from parental guarantees.”

8 Consider using a letting agent

It costs 15-20 per cent of rental income, but this is tax deductible. It means you don’t have to find or vet tenants, suffer late-night queries, visit to chase up rent arrears or find electricians when the fuses blow.

9 Find the best agent firm

The company must be in the Association of Residential Lettings Agents and one of three rival redress services (Property Ombudsman, Property Redress Scheme and Ombudsman Services Property). Insist on seeing its record of lettings to students and check the firm’s reputation with local college accommodation bureaus.

10 After graduation

Being a landlord doesn’t have to end when your offspring goes from college to work. Do some research and be ready to sell if necessary – some colleges are building their own flats, so reducing demand for landlords’ properties in the future. But play it right and your family will have an investment as well as a great education.

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