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About 2 weeks ago 36
University Students Becoming Landlords
With the rising costs of university education some families of students are choosing to help their offspring through University and onto the property ladder.
Property values are depressed, rental returns are high and interest rates for borrowing are at an all time low. This is a wonderful opportunity to create profits to offset the costs.
It’s important to buy in the right location and not to put undue pressure on the student though. Parents need to remember that students visit the fountain of knowledge to drink!
A common concern of parents is whether their kids will find the right quality accommodation whilst they’re at Uni. Owning the property themselves or in partnership with their offspring can often be very comforting as well as financially rewarding.
It’s not uncommon for students to be paying £100 a week for accommodation and in many University towns it’s possible to purchase properties for less than £250,000 which can be rented to six student sharers. That’s a gross return of £31,200 a year or 12.48%.
Based on borrowing 70% of the money with a buy to let mortgage (£175,000) on a 5 year fixed rate interest only mortgage at an interest rate of 5.25%, the mortgage interest payments equate to £8,187.50 a year. Allowing for a generous budget of £5,000 to cover letting costs, management and maintenance this still leaves a handsome profit of £18,012.50 a year. That’s without factoring in any increase in values when the property market improves.
Sadly, the required deposit towards the purchase is out of the reach of some parents, unless of course they are in a financial position to raise the money by remortgaging their own home.
There is a major shortage of good quality student accommodation in many University cities. Lincoln is a prime example having recently reported that many of their students are currently housed in Portacabins due to lack of supply of student property.
Birmingham University seem very advanced in their thinking, with the Student Union running their own letting agency on campus. The Brummie Uni also insists on all landlords taking a £150 accreditation course before they will market properties to their students. There are three providers of the accreditation courses we know of:-
The syllabus and rules of all schemes are identical and the accreditation certificates are transferable. Continued Professional Development courses are also provided for ongoing learning leading to long term accreditation.
Mary Latham, West Midlands regional representative of the National Landlords Association and a trainer for both the MLAS (Midlands Landlord Accreditation Scheme) and the NLA (National Landlords Association) said ” Buying a property for a young person to live in, while they are studying, can make a lot of sense but parents need to understand their legal obligations when the property is shared by fellow students. When it is set up correctly from the beginning the property can pay excellent returns to fund a student through their university years and afterwards it can be kept as a continual income stream or sold to pay student debt . ”
One final thought …. wouldn’t it make sense for local councils to work with student unions and national building companies on the development of bespoke student accommodation for sale to private sector accredited landlords?
Watch this space!
The video above was recorded for You Tube and can, therefore, be shared publicly.
Mark and his family have been investing in property since 1989, initially in the Norwich area but more recently across the length and breadth of England. Mark created Property118.com as a social network for landlords with a vision of becoming the UK’s largest online property investor directory.
Mark’s experiences and strategies as a landlord are shared here
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