“Tim Hollingsworth, managing director of leading estate agency and surveying firm Rumball Sedgwick, considers student ‘living costs’, and options for student housing.
Now that the summer is over, kids are going back to school, and for many of you, older children will be going to, or back to, university. If this is the first time your young adults have lived away, you are in for a treat, as your living rooms will no longer be full of discarded socks and pizza boxes, and you will once again be able to get back into your own bathroom.
However, there is a downside, as you will rapidly discover: the bank of Mum & Dad is about to be called into serious action.
Since the introduction of student loans, universities throughout the land have been gradually ramping up their accommodation charges, so that in most cases they are now set at a level which uses virtually all of the ‘living cost’ component of the student loan. This leaves students with nothing for food and other costs. Although it is often possible for students to get low grade work, they will usually struggle to sort this out in their first year, as they have so much else to deal with. So be prepared to subsidise your student – and submissions to the recent review of HE finance estimate this cost to be up to £1,500 each term!
Faced with these amounts, one strategy that parents may consider, is whether they can help by buying a property in the university town, which will accommodate their own child, and rent out rooms to other students. This is especially appealing if the university town is not in the south-east of England, as prices for small houses in the regions make it much more feasible.
However, you do need to think carefully about this. For example, any property let to 5 or more people must be licensed by the local authority, which brings a raft of legal obligations, including minimum room sizes, fire escapes, etc. And recent changes to legislation affecting buy-to-let property mean that you can no longer claim back all your mortgage interest as an expense.
It is possible to run a buy-to-let property through a company, but that also brings its own issues of more detailed financial reporting, corporation tax, etc.
Then there’s the time it takes to actually buy a property – even if you are a cash buyer and there is no chain, you need to allow at least 3 months for this. If you want to buy the property through a company, you need to allow another month to arrange the company mortgage.
Becoming a landlord is a major undertaking, and you need to take advice from an accountant before you start. Having said that, it can still provide an excellent return on investment, and could turn your child’s time at university into a revenue earner for you, rather than a significant drain on your resources.
If you are thinking about buying a student property in a university town, it is particularly important to consider the state of the property. Because you probably won’t want to keep the property for very long after your child finishes at the university, it’s very important that you should be able to sell it easily – so make sure it’s in good condition in the first place! If you end up with the property empty for 6 months while you try to sell, it could be very costly. A good surveyor, such as Rumball Sedgwick, will be able to advise you on the condition of the property, and other local circumstances which you may not be aware of. This could save you a lot of trouble in the future.”