‘Buy for Uni’ property for children?
Your child has their place at university and is moving into halls but what about longer term? Have you ever thought about buying a property as an investment that they can live in whilst completing their education?
Single flat or HMO?
You may be happy to buy a small flat just to house your child and you may not be concerned if the rental income does not entirely cover the mortgage. Alternatively, you may need rental income to cover the mortgage payments in full or want to make a small profit and so could consider housing your children’s friends too.
Houses of three of more tenants forming more than one household and sharing facilities can be considered a House in Multiple Occupation (HMO) and if it is a large HMO, housing five or more tenants, you should check with the local housing authority as a licence will be required. HMOs may not be allowed in some areas, if for example they are not considered suitable for the area or there are already too many HMOs in one area.
Guarantor for your child as the landlord?
Another route to consider is your child taking out a buy-for-uni mortgage where they become the landlord with all of the associated responsibilities. They will assume the mortgage but you will act as a guarantor, either providing savings as a deposit or your home as security. Although you may take responsibility for the administrative tasks, e.g. handling rent, vetting tenants and maybe even the maintenance of the property, your child would be the mortgagee and could take advantage of the first-time buyer stamp duty relief.
Buying an investment property on a short-term basis can be costly, due to the cost of finance, and associated fees, charges, legal costs, stamp duty etc. It can work out as an expensive investment if the property were to be sold on again in only a few years’ time however it can help offset the high costs of housing your child at university.
It may be sensible to consider the investment as a medium-to-long term one, past the expected time that your child is at university. You should research the area and property demand to ensure that it will appeal to a new wave of students or professionals living in the area in the coming years. Discuss with local agents the demographic in the area and property and lease requirements, e.g. term-time, six-month term etc.
Consider not only the initial investment but any refurbishment required to make the property suitable to house several people, e.g. upgrades to kitchen, bathroom, individual door locks, and any capital to meet fire and safety regulations.
If your child will live in the property and it is not solely an investment project, it is likely to be a regulated transaction and you will require advice from an intermediary who is authorised and regulated by the Financial Conduct Authority. For details of regulated intermediaries, please refer to the Financial Services Register.