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5 Aug 2020

News

Student buy-to-let – worth a look?

Lee Tillcock, Head of Business Moneyfacts at Moneyfacts.co.uk – the money search engine, comments:

“The cost of university education is rising year on year, and is becoming a real concern for both students and parents. One of the biggest costs is living accommodation, but one solution, which parents could opt for, is to invest in a buy-to-let property for their child.

“Moneyfacts.co.uk research has revealed that over 40 lenders will offer buy-to-let mortgages for student let properties, with Scarborough BS also offering a specialist product range. And only this week Bristol & West have announced their buy-to-let mortgages will now be available for student lets.

“While the upfront costs of purchasing the property can be sizeable, with deposits required, mortgage and solicitor fees to pay, there is the opportunity to reap a healthy reward. Not only will your child live rent free, the rental income from the other tenants in the house should at least cover your interest costs and hopefully more. Also, if house prices continue to rise, you will benefit from any appreciation in value of the property when you come to sell.

“When assessing whether this is a feasible option, it is important to factor in the ongoing costs associated with becoming a landlord. You will need to bring your property into line with the current fire, heath and safety regulations, be prepared for any loss in rent if a tenant leaves, property maintenance costs and possibly pay property management fees if you choose to use an agent.

“But one cost which is relatively new and which many new landlords may be aware of is the HMO licence. A houses of multiple occupancy licence will be required for a property with five or more tenants from two or more families sharing facilities e.g. bathroom / kitchen. However depending on the council issuing the licence, the criteria can be different, so it’s certainly worth doing your homework first.

“Not only does the criteria vary between councils, so does the cost. Recent reports have shown that the cost can vary anywhere between £100 and £2K. Choosing not to comply with the licencing requirement could end see you being fined thousands of pounds.

“Property prices can fluctuate in the short to medium term, so for parents considering keeping their property for just the short period that their child is at university could run the risk of being forced to sell at an inappropriate time. Successful property investment is normally considered a long term strategy.

“Student buy-to-let can be a great solution both for parents and their children, but it should not be entered into without careful consideration. With many experts predicting that the property market may have reached a peak, it could be a risk too far for many parents.”

Selection of the best deals currently avaiable:

Company

Rate

Mortgage
Type

Period

Max
LTV

Fee

Redemption
penalty

Bradford & Bingley

5.44%

discount

For 2 years

85%

2% of adv (min £599)

1st 2 years

West Bromwich BS

5.59%

discount

For 2 years

85%

2% of adv

No penalty

Leeds BS

5.89%

fixed

30.9.10

80%

2% of adv

To 30.9.10

Standard Life Bank

5.94%

fixed

To 30.9.10

85%

£2K

To 30.9.10

Moneyfacts.co.uk – the money search engine

Moneyfacts Group
Moneyfacts is the UK’s leading independent provider of personal financial information and our data is used and trusted throughout the financial industry. 

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