Investing in a buy to let property is one way a parent of a student can help to provide a safe and secure home. With the rise of tuition fees and expensive living costs, being a student can often mean money is tight.
Students are currently spending upwards of £80 a week on student accommodation, which amounts to a massive £3,840 a year on a place to live, not to mention utility bills and food.
If you, as a parent are able to afford a small house or flat, you could help your child become far more financially secure during university and post graduation. (1)
Record numbers of students are attending university in the UK, despite the hike in student tuition fees reaching £9,000 a year!
Property developers have been quick to jump on the student accommodation band wagon and have developed many modern ensuite apartments designed specifically with the student market in mind. The cost of residing in such accommodation will set you back approximately £100 a week with some tenancies offering all bills inclusive options.
The average cost of studying for an undergraduate degree in the UK as a full time home student is approximately £45,000. This figure could be what a majority of students will face in debt once they graduate. (3)
If you consider that you might be spending approximately £14,400 on rent over a three year period, the idea of investing in a property and making your money work for you is more financially appealing.
Nightmare Student Flat Share
It is not only the financial aspect of student life that can affect your child at university but also the social and environmental issues which can occur when sharing accommodation.
Here are the four issues you could help your student child avoid:
If you have invested in a buy to let property, you are the landlord of the property and your student child will be the tenant. This set up is easier to manage if maintenance or repairs are needed, as you can organise any work needed between yourselves rather than having to involve a third party landlord or estate agents. In addition, landlords can be unreliable and charge extortionate admin fees and require a non-refundable deposit.
Even the strongest friendship can quickly turn sour in a student house share and can result in students moving out. Once a student has signed a tenancy agreement, they are liable to pay for the entire tenancy period even if they decide to move out. If you have bought a buy to let property for your child, you can guarantee that if there are any issues, your child will not be forced to move out.
Student accommodation can cause many arguments in regards to cleanliness and people not pulling their weight with housework. Communal areas such as the kitchen and bathroom are often the worst culprits and can make students sick, depressed and even stressed which can seriously affect their studies.
Living with people can mean putting up with a lot of noise. If you appreciate a good nights sleep, student accommodation may not be for you. As a student, there is nothing better than going to a noisy house party and then leaving at 2am to return to a peaceful home where you can recover.
How to Afford a Buy to Let
There are a number of ways to invest in a small buy to let property.
If you are financially able to buy a property in cash then this is the easiest way to invest. Once you have bought the property outright you can discuss any financial obligations your child will be required to pay such as an agreed monthly rent or a monthly cost of upkeep. You could even consider taking out a disclaimer to ensure you both keep your side of the deal.
2. Buy to Let Mortgage
You can take out a buy to let mortgage on a property, and ask your son or daughter to pay a weekly or monthly rent, thus paying off the mortgage and allowing your child to become financial independent and understand the process of how to budget and afford a property of their own.
3. In Their Name
By investing in a property in your child’s name, any rental income from the buy to let would belong to your child and would be taxed if it were more than his or her annual personal allowance.(4)
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By investing in a two bedroom apartment, for example you have given yourself the opportunity to rent out another bedroom to a fellow student or friend. This will also help you child to afford the rent you require to pay off the mortgage on the property.
However, it is important to note that any tenant must sign an official tenancy agreement before moving in to avoid any late or missing rent arrears.
Avoid Amateur Property Investment Mistakes
1. High Maintenance
Students require minimal maintenance properties. Often this will be the first time they have moved away from home and will be learning how to look after themselves and their home. The easier the property is to keep clean, tidy and presentable the better. There is no point snapping up a quick bargain if your child is not able to spend the time and money on maintaining the property.
2. Adventurous Projects
Property investors are renown for investing in cheap properties in dire need of modernisation, renovation and development. This method enables experienced developers to quickly make money and move on. This approach is the complete opposite of what you should be looking for. A student will often not have sufficient experience, time or money to complete any maintenance or DIY work themselves.
If you are buying a property in a different city which you are not familiar with it is vital to do sufficient research into the areas you are planning on investing in.
A property might look nice online but it is important to visit and check the surrounding areas to see if it is safe and suitable for student living. If you are unsure of where to start your property search, find where the university is based and look within a 5 mile radius. This should give you properties which are student friendly and within an easy commute to class. Moreover look out for places which are close to local amenities and close to transport links as they will be easier to rent out if necessary.(5)
4. Savvy Woman