As both British Expat & Foreign National Students prepare to return or start their courses at UK universities, Stuart Marshall of Liquid Expat Mortgages explains that buying a UK student home, as opposed to simply renting a property for the duration of a degree course, can provide an opportunity for parents as and not just an expense.
Now that university students are finishing their exams and turning their attention to where they will live for the next year or two, this is the ideal time for parents to consider the benefits of investing in UK buy-to-let student housing.
A combination of factors such as the uncertainty of the current economic climate, favourable exchange rates back to GBP Sterling and the low cost of UK housing at the moment, provide the perfect opportunity for Expat parents to find a competitive deal on buying a UK property. When you look at these factors with the historically low UK base rate, it’s probably fair to say that if your child or children are at University this is a good time to consider purchasing a UK property as opposed to renting.
The student housing market is a resilient one right across the UK. There is always a massive demand for good-quality housing to accommodate the thousands of students who live in the cities during term-time. With more students than ever before now attending UK universities, there is a severe shortage of property, as many universities are already near capacity. Liquid Expat Mortgages explains that overseas buyers can even be looking to secure a UK property for their children’s future UK University up to 10 years before they will be attending. Stuart Marshall comments this is particulary common for overseas buyers from the Far East who will simply rent the property out in the Buy to Let market before their children reach the relevant age and attend one of the London Universities.
There are many benefits which you could take advantage of when purchasing UK property. For instance, if you put the property in your child’s name and they plan on living in the property throughout university, there is no capital gains tax to pay. Additionally, the rent-a-room scheme allows your child to rent out a room and earn up to £4,250 per year tax-free.
Parents could remortgage their UK or Overseas property in order to buy a property in their child’s name, but it is necessary to seek the advice of an independent financial adviser before taking any major steps. An IFA will be able to explain all the available options and offer guidance on how to go about purchasing a second (or First) UK property.
Location is a key factor when choosing your property. Parents should only consider purchasing property in densely populated student areas and where nightlife is lively and where there is easy access to campuses and colleges.
The recommendation is to purchase a house rather than a flat, as students will enjoy a greater sense of community living in a shared house. If the child you are buying the property for already knows which friends they want to live with, you already have a ready-made set of guaranteed tenants, which is ideal.
However, there are significant tax and legal implications to bear in mind when renting a property to students. Landlords have to pay income tax on the revenue generated from rent, while other practicalities include gas and electricity safety certificates, landlords’ insurance, and multiple occupancy licences. You may also have to chase your rent and be prepared to pay a substantial amount for the general maintenance of the property.
It really is worth making the most of this opportunity while UK property prices are currently low as they won’t always stay this low, but remember that property doesn’t work as a short-term investment. It is a long-term commitment which will require ongoing maintenance, which can often be long after your child’s three years at university are over, so make sure that you ask for an IFA’s advice before you make your decision