This is a question I get asked a lot. Many of you will have children either at University or looking to go this coming September and for those who are a bit savvy when it comes to investing, it seems like a sensible thing to do to buy a property rather than have them throw their (or your!) money away on renting. However, before you take the plunge, there are several factors you need to take into consideration….
- Do you know the market in the area? Which are the best streets to buy on and which to avoid? If not, then do you have any contacts that can help you?
- You will be paying the increased ‘2nd home’ stamp duty which adds on an additional 3% to standard stamp duty rates. Depending on how much you are paying for the property this could add on a hefty chunk.
- How long do you plan on holding the property for? If it is just for the duration that your child is at university for (3-4 years) then it may not be worth it financially when you take into account the fees and taxes involved.
- If you plan on holding the property long term are you willing to become a student landlord once your own child has moved out? Do you have agents in place who are good enough to manage it for you on an on-going basis? Can you or do you want to manage those agents remotely.
- Are you aware of the regulations surrounding HMO’s (houses of multiple occupation)? This is what student properties are classed as and you need to make sure you are fully aware of what you need to know.
So how do you decided whether it is the best thing to do? Well, personally, I would first answer the above questions and then weigh up all the costs of both options. When I say all, I do mean ALL in terms of costs. Often people forget things like furnishing the property or ongoing maintenance. And don’t forget to allow for voids should every room not be full all the time, this can have a big impact on your profit margin each month!
Hope that helps! I invest in HMO’s for both students and professionals and so am very aware of the upsides and the downsides to this high cash-flowing strategy! If you’d like to know more or simply have a chat, then I’m always more than happy to go for a coffee if you’re local or speak on the phone or skype if you’re not. Simply drop me an email on firstname.lastname@example.org.