Mortgage Clinic: 'Is it a bad time to buy a flat for our daughter?'
This summer, I had planned to get a £275,000 buy-to-let property in Bristol, where my student daughter and her college friends will live. But I'm confused. House prices are falling, yet I hear that rents are holding up well. Is our plan terribly ill-timed? Obviously, my daughter really wants the plan to go ahead. BF, Manchester
For wealthier parents, a buy-to-let for offspring at university is appealing. While rent from your daughter's friends should cover the mortgage, there's also opportunity for capital growth.
No student worth their salt would let a parent back away easily from such a generous offer, but it's what you want from your investment that really counts.
With prices falling in many parts of the country, whether to go ahead now depends largely on how long you plan to buy for – and if you're in it solely for a swift profit.
"If you're buying for the length of your daughter's degree course, that may prove too short a term to make the investment worthwhile," warns David Hollingworth of broker London & Country. "But if you intend to keep the property longer term and let to students beyond your daughter's stay, then it could still be worth it."
Brokers stress that, like all markets, housing is cyclical. There's a high risk that the going will be tough for some time, but it's likely that – in due course – the "correction" will end and prices will stabilise and rise again.
So, when will those prices rise once more? Your buy-to-let property would need to stay in the market until at least 2013 for you to ride out the rough, says Rob Clifford at broker Mortgageforce: "Think carefully about your objectives – if you're hoping to achieve a certain capital growth during the next couple of years, you'd be better off putting your money into a savings account. Unless you find a bargain property and hold it for five years, avoid buying right now."
Mark Harris at Savills Private Finance suggests 10 years as a guide for a minimum investment term, and warns that loans are increasingly expensive. "Fewer buy-to-let mortgages are available as a result of the credit crunch, and they require bigger deposits – at least 15 per cent and more likely 20 or even 25 per cent, with surplus rent to the mortgage payments," he says. So for your £275,000 property, you'll need a deposit of up to £68,750.
Harris adds that not all lenders will let you rent out to a family member, further restricting choice. On a brighter note, rents look set to remain buoyant thanks to high demand from thwarted first-time buyers and immigration, although areas with over-supply of "off-plan" flats are suffering.
Send us your questions and you could receive £50 to spend at Amazon
Foxed by jargon? Worried by the credit crunch? Email a question to email@example.com. We will not reveal your identity, and we cannot give specific advice. If your question is printed, you'll receive a £50 voucher from Amazon.co.uk, so you can kit out your home with anything from a lawnmower to an espresso machine. www.amazon.co.uk/homeandgarden
- 1 Breaking the Silence: In the reality of occupation, there are no Palestinian civilians – only potential terrorists
- 2 Mike Ashley wants blood after last season's trauma at Newcastle - and it won't stop with Derek Llambias
- 3 Richard Nieuwenhuizen death: Six teenagers and 50-year-old father convicted of manslaughter in shocking case of referee killed over a game of football
- 4 Exclusive: Newcastle's star talent-spotter on brink as Joe Kinnear sparks walkout
- 5 Vast methane 'plumes' seen in Arctic ocean as sea ice retreats
iJobs Money & Business
£500 - £600 per day: Orgtel: FX Options Front Office Java / C# Developer - Ba...
£600 - £700 per day: Orgtel: Project Manager - Front Office - Regulatory IT C...
£600 - £750 per day: Orgtel: FATCA Project Manager - Banking - London - £600-...
£550 - £600 per day: Orgtel: Fidessa Analyst / PM - Banking - London - Up to £...
Day In a Page
A three-bedroom semi-detached house in Lower Slaughter constructed out of natural stone in keeping with the Cotswolds, £650,000
A smartly presented two-bedroom cottage, extensively refurbished with sun-filled garden and terrace, £350,000
A Victorian barn conversion at Heath End Farm with four bedrooms. £1.25 million.
A spacious two-bedroom flat within an impressive Victorian terrace building, close to Fulham Road and New Kings Road, £375,000.
A two-bedroom flat at Grafton Court, a former manor house in the village of Temple Grafton, with private terrace, £450,000
A four-bedroom listed mews in Apley Castle with impressive drawing room, £425,000
A two-bedroom flat close to the Regent's Canal with a private patio and a concierge service. £500,000
A two-bedroom flat at the Candlemakers Apartments set over two floors with a balcony. £625,000.
This three-bedroom Grade II-listed thatch in the pretty village of Wigginton. £450,000.
A new two-bedroom flat with a bright open-plan reception and skyline views. £450,000.
A modern home of almost 1,000sq ft is close to Stoke Newington's high street. £499,950
A five-bedroom bungalow in Hoveton with riverside garden and mooring dock, £550,000
A refurbished one-bedroom flat with south-facing reception and high ceilings. £579,950
A four-bedroom Grade II-listed house in Nazeing with large gardens. £550,000
A modern four-bedroom house in a converted stable within walking distance to Peckham Rye. £695,000
Three-bedroom house in a quiet residential area within close distance to Battersea Park. £450,000
A three-bedroom cottage within commuting distance of London, Norwich and Cambridge. £250,000
A two-bedroom cottage with a sun room and gardens in South Chard. £350,000.
A three-bedroom semi-detached house with original features including fireplaces and wooden flooring. £399,950