Letting to students
Discussion
So my kids (twins) will be off to Uni in a couple of years. I have saved a nice bit of cash for my contribution to their Uni expenses and if they get in where they want to go its enough to be a good deposit on a house each. I can afford to pay for most of the mortgages needed for the properties and can likely meet all of the cost with their maintenance loans on top but it will leave them pretty skint.
Now the tempting bit, I'm looking at buying them a 3 or 4 bed house, do I rent out the remaining rooms to other students? How much can you charge per room? Is it worth the hassle? What legal stuff do I need to get in place?
Now the tempting bit, I'm looking at buying them a 3 or 4 bed house, do I rent out the remaining rooms to other students? How much can you charge per room? Is it worth the hassle? What legal stuff do I need to get in place?
You are very nice. Can you be my daddy?
I would absolutely rent out the other rooms.
You need to claw some money back somehow.
The price depends on the property and location and (it seems obvious surely???) you should research the prices on websites like spare room (this one is probably best tbh) / zoopla / right move.
I would imagine it would need to be somewhat cheaper being student digs, or you may end up having a working lodger in at full price.
I would absolutely rent out the other rooms.
You need to claw some money back somehow.
The price depends on the property and location and (it seems obvious surely???) you should research the prices on websites like spare room (this one is probably best tbh) / zoopla / right move.
I would imagine it would need to be somewhat cheaper being student digs, or you may end up having a working lodger in at full price.
tankplanker said:
So my kids (twins) will be off to Uni in a couple of years. I have saved a nice bit of cash for my contribution to their Uni expenses and if they get in where they want to go its enough to be a good deposit on a house each. I can afford to pay for most of the mortgages needed for the properties and can likely meet all of the cost with their maintenance loans on top but it will leave them pretty skint.
Now the tempting bit, I'm looking at buying them a 3 or 4 bed house, do I rent out the remaining rooms to other students? How much can you charge per room? Is it worth the hassle? What legal stuff do I need to get in place?
All depends on location.Now the tempting bit, I'm looking at buying them a 3 or 4 bed house, do I rent out the remaining rooms to other students? How much can you charge per room? Is it worth the hassle? What legal stuff do I need to get in place?
How do you know where they'll end up going to uni?
Can you afford things if interest rates go up a couple of %?
Renting always comes with issues, particularly with students who want to wreck the place (do they still do that?). Would it be friends who share with them or advertise?
Don't get me wrong, great idea but don't stretch yourself too far.
What about a decent 2 bed for the both of them?
There is nothing altruistic about my intentions, I want to get them out of my house 
I can't be sure which university they will end up at, and will likely have to buy the house part way through the first year for them to move into at the end of the second year. They will both be doing at least 5 years at Uni so its not a short term investment.
I've worked the mortgage costs on 5% as a starter then ramped it up to 8%, and I can still afford it without renting out the rooms. More than that and I'd have to cut back on luxuries.
I can't be sure which university they will end up at, and will likely have to buy the house part way through the first year for them to move into at the end of the second year. They will both be doing at least 5 years at Uni so its not a short term investment.
I've worked the mortgage costs on 5% as a starter then ramped it up to 8%, and I can still afford it without renting out the rooms. More than that and I'd have to cut back on luxuries.
tankplanker said:
That could happen in any house share, and I'm happy to be the unpopular landlord so take the brunt of it.
It could, but the difference would be that the landlord wasn't one of the tenants' parents. If you think it's no issue than fair enough but I would be concerned that your kid(s) could bear the brunt of any other students' gripes because they're related to you.This would be a fantastic thing to do. When I was at uni the houses were of shockingly poor quality. I lived in Oxford at paid £300/month for a room in a 6-bed house (2009-2011).
Buying a 4-bed house gives you 5 "student" rooms (90% of the time the living room is an additional bedroom, and there's just a sofa in the kitchen or at least a table).
Be aware of HMO regulations and licencing. Many student towns/cities have rules regarding this.
Buying a 4-bed house gives you 5 "student" rooms (90% of the time the living room is an additional bedroom, and there's just a sofa in the kitchen or at least a table).
Be aware of HMO regulations and licencing. Many student towns/cities have rules regarding this.
Plan to do it. You'll be paying an extra 3% SDLT as it's a second home unless it's fully in their name in which case I guess you'll have to sort out gifting. otoh, letting out a couple of rooms could be classed as lodger / rent a room from which you can generate 7.5k pa tax free. Make sure you don't hit the HMO regs, though as they can be complex to fulfil.
Who knows if the rules will change again by 2018 (they probably will)
Who knows if the rules will change again by 2018 (they probably will)
A couple of my mates were in the fortunate position where their parents could do this, it's a no-brainer for me.
In fact one of them, a fellow PH-er, saw it as so lucrative he carried it on after Uni, started his own portfolio, and is now pretty much a full time BTL landlord - he earns far more out of it than he did from his Engineering job that his degree led to!
The massive draw for his mates is a house that is not a s
thole. Your boys being resident (son of) Landlord makes the inclined to treat it like their own home - your son and his mates have a vested interest in looking after the place.
In fact one of them, a fellow PH-er, saw it as so lucrative he carried it on after Uni, started his own portfolio, and is now pretty much a full time BTL landlord - he earns far more out of it than he did from his Engineering job that his degree led to!
The massive draw for his mates is a house that is not a s
thole. Your boys being resident (son of) Landlord makes the inclined to treat it like their own home - your son and his mates have a vested interest in looking after the place. I was fortunate enough to do this as a student. My folks contributed pretty much what they would have done had I been renting, but since I was also getting rent I could knock lumps off the mortgage quickly. I went to halls for the first year (definitely recommended - your kids will miss out on too much social stuff if they are out of the 'conventional' process from day one), bought a 2 bed flat in the Spring, picked a mate to share with and moved in in the summer. Mate's rent paid ~90% of the interest on the mortgage, but he got a reasonable rent and a much better than average student digs.
I owned the flat and my Mum was guarantor on the mortgage. It was my responsibility to collect the rent, pay the bills etc. I would suggest you do the same - you talk about yourself collecting the rent rather than the kids. It will teach them valuable lessons to have that responsibility, plus takes it off your plate. It's important to have the place in their name as if it's yours it will be a second property so subject to additional SLDT and more importantly CGT on sale. Also you'd be a landlord doing ASTs whereas they can be resident landlords so have lodgers under rent-a-room which relaxes the rules and mitigates most or all of the tax liability.
For me it's a no-brainer financially, but depends on your kids being responsible enough to take it on and treat it seriously, plus act as 'landlord' rather than 'house mate' when necessary, which does change the dynamic.
I owned the flat and my Mum was guarantor on the mortgage. It was my responsibility to collect the rent, pay the bills etc. I would suggest you do the same - you talk about yourself collecting the rent rather than the kids. It will teach them valuable lessons to have that responsibility, plus takes it off your plate. It's important to have the place in their name as if it's yours it will be a second property so subject to additional SLDT and more importantly CGT on sale. Also you'd be a landlord doing ASTs whereas they can be resident landlords so have lodgers under rent-a-room which relaxes the rules and mitigates most or all of the tax liability.
For me it's a no-brainer financially, but depends on your kids being responsible enough to take it on and treat it seriously, plus act as 'landlord' rather than 'house mate' when necessary, which does change the dynamic.
Edited by Jamp on Friday 29th January 12:56
That sounds the best way, letting them do most of the work and avoiding tax. 
I'm getting them a first time buyers ISA for both of them for the last couple of years worth of my monthly savings for them. Hopefully I can find a help to buy scheme for them to max out the Gov contribution. I'm hoping to get a new build as it'll reduce the maintenance costs.
I'm getting them a first time buyers ISA for both of them for the last couple of years worth of my monthly savings for them. Hopefully I can find a help to buy scheme for them to max out the Gov contribution. I'm hoping to get a new build as it'll reduce the maintenance costs.
How are these kids going to satisfy Sarnie and his mates that the mortgage is "affordable" for them?
On your game plan it seems to be the kids who will have the mortgages, unless you're planning to buy in your own name and cough up the excess buy-to-let stamp duty etc. You'd also be in the CGT regime.
Also, if there's going to be "renting out" involved questions may arise as to whether that's permitted and then there's the matter of declaring for income tax. For the rent-a-room scheme it has to be the owner/occupier who does the renting out.
https://www.gov.uk/rent-room-in-your-home/the-rent...
On your game plan it seems to be the kids who will have the mortgages, unless you're planning to buy in your own name and cough up the excess buy-to-let stamp duty etc. You'd also be in the CGT regime.
Also, if there's going to be "renting out" involved questions may arise as to whether that's permitted and then there's the matter of declaring for income tax. For the rent-a-room scheme it has to be the owner/occupier who does the renting out.
https://www.gov.uk/rent-room-in-your-home/the-rent...
tankplanker said:
That sounds the best way, letting them do most of the work and avoiding tax.
I'm getting them a first time buyers ISA for both of them for the last couple of years worth of my monthly savings for them. Hopefully I can find a help to buy scheme for them to max out the Gov contribution. I'm hoping to get a new build as it'll reduce the maintenance costs.
Who is avoiding tax?I'm getting them a first time buyers ISA for both of them for the last couple of years worth of my monthly savings for them. Hopefully I can find a help to buy scheme for them to max out the Gov contribution. I'm hoping to get a new build as it'll reduce the maintenance costs.
What tax do they think they are avoiding?
I took out a couple of BTL mortgages this year. Both stipulated that I could not 'rent' to a family member. Quite how they would know is beyond me as they have not required sight of the tenancy agreements and as long as the mortgage payments arrive I guess they wouldn't care less but you need to consider that issue.
I have another house that my student daughter lives in and I rent two rooms to other students. No issues re. mortgage as I own the house outright but do research local HMO rules. Generally it's more than two family groups in a single property so if you have a house with both children living in it then a third person is not a problem but a fourth would require HMO status (all depending on local regs). As already mentioned many university towns have changed permitted change of use rules in 'student' areas.
I have another house that my student daughter lives in and I rent two rooms to other students. No issues re. mortgage as I own the house outright but do research local HMO rules. Generally it's more than two family groups in a single property so if you have a house with both children living in it then a third person is not a problem but a fourth would require HMO status (all depending on local regs). As already mentioned many university towns have changed permitted change of use rules in 'student' areas.
Let your kids do a year at uni in Halls so they can make some friends. Said friends can then live in the house with them. At least that way your kids will be able to vet them.
A considerable number of my friends dropped out of uni in the first year because it wasnt for them. You may end up stuck with an unneeded house.
A considerable number of my friends dropped out of uni in the first year because it wasnt for them. You may end up stuck with an unneeded house.
A friends parents ended up doing this when the market was strong in 2007. They now own a house 3 hours from home, which they never see, and while it probably does generate some income the capital growth was negative for a long while and I believe only in the last 12 months its actually worth more than they paid back when.
Didnt really make a lot of sense to me - if you want to rent to students do so in your local town where you can look after the house and do your own decorating/repairs over summer if needed (NB, it WILL be needed). That way you wont be angry at your own kids when they break a window, piss in the cupboard, drop something in the new sink, or throw up on the carpet.
Didnt really make a lot of sense to me - if you want to rent to students do so in your local town where you can look after the house and do your own decorating/repairs over summer if needed (NB, it WILL be needed). That way you wont be angry at your own kids when they break a window, piss in the cupboard, drop something in the new sink, or throw up on the carpet.
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