The luckiest students will be graduating with a home of their own

Buying a house for a child at university could prove a sound investment if parents do the legal groundwork and get the location right. Esther Shaw reports

Student digs are not exactly re- nowned for their standards of cleanliness, furnishing or maintenance, or for being subject to stringent safety checks.

And many students, it seems, are no longer prepared to put up with it. According to Abbey Mortgages, 154,000 of them – some 14 per cent of the current student population in Britain– are hoping to buy their own home in their university town, either alone, with friends or with the help of their parents.

Indeed, buying bricks and mortar for their children to live in while they're at university can make financial sense for parents.

"By doing so, you are not throwing away money every month for sub-standard rental accommodation," says Melanie Bien from mortgage broker Savills Private Finance.

In theory, the rent you get from letting the other rooms should cover the mortgage repayments, so providing rent-free accommodation for your child.

Another advantage is the peace of mind you get from knowing that they're in a safe environment.

"Finding a decent [rented] property for your children to live in at university can be a traumatic experience," says Andrew Montlake at broker Cobalt Capital.

David Smith, senior partner at Dreweatt Neate estate agents, adds: "The concern for parents is often that once their child leaves student halls after the first year, they are at the mercy of private landlords."

But if they decide to help them buy a home, parents must remember that it is their child who will have to manage the property, stresses Ms Bien. "He or she effectively becomes the landlord and is responsible for finding tenants, for maintenance and for collecting rent. This may be too much responsibility."

Lisa Taylor from financial analyst Moneyfacts adds that living with friends who are also your tenants can be difficult, given that the relationship must now involve a business element.

"There is also a raft of legislation to consider," she continues. "Your student house may need to be licensed under the House in Multiple Occupation agreement. There are also fire and safety requirements, as well as the new tenancy deposit protection scheme."

It makes sense for parents to try to help with as much of the process as possible, such as settling tenancy agreements, carrying out regular maintenance checks and ensuring that the tenants set up direct debits to pay their rent.

Students have a reputation for causing damage and not paying rent, but problems can be avoided by ensuring references are properly checked and parents' details taken so they can act as guarantors.

If you can't do this yourself, you might want to consider hiring a managing agent – although this will eat into profits, to the tune of around 15 per cent of the rental income.

If you are looking to make big money quickly from student property, then think again.

"As house prices slow, and indeed fall, in some areas, there is less opportunity to make a quick buck than there might have been in the past. Indeed you should think about owning a property for five to 10 years," says Ms Bien.

While rental accommodation for students will obviously be in demand in university towns, it is important to research the area before you buy.

"There are always particular roads near the university that are popular with students – even if the standard of accommodation is not as good as in other, less sought-after locations," says Mr Smith at Dreweatt Neate.

The good news is that student lets tend to provide above-average returns – particularly near the more popular universities. According to broker Landlord Mortgages, the average student property offers a yield of 6.59 per cent, far higher than for a standard buy-to-let property (currently 5.42 per cent).

"Generally speaking, it is possible to obtain a greater yield as you are renting to four or five people, rather than one family unit," says Cobalt Capital's Mr Montlake.

Durham offers the best return on investment for landlords, with low property prices and high rent – giving an average annual yield of 9.12 per cent. Nottingham, Stoke, Sheffield and Blackpool are all near the top of the list. Among the least profitable towns are Cheltenham, Guildford, Pontypridd – and Crewe, with an average annual yield of just 3.4 per cent.

Parents looking to buy can either use existing savings and investments, raise capital against their own home to pay the deposit or fund the purchase, or opt for a buy-to-let mortgage.

They also need to consider the tax implications arising from the ownership of the property, says Sean Scahill of accountants The Fisher Group. "If you opt for the property to be in your child's name, you need to be comfortable with the child potentially having a large amount of cash at his or her disposal if it is sold.

"[But] if you want more control, this does mean that when you come to sell, you will be subject to capital gains tax [CGT] on any profits made."

Buy-to-let investors did, however, receive a welcome boost in the last pre-Budget report. The Chancellor, Alistair Darling (pictured), announced plans to standardise CGT rates. This means buy-to-let investors could pay CGT at just 18 per cent – as opposed to a maximum of 40 per cent at present – when the time comes to sell up.

Six to view in the South-east


Salisbury Green, Southampton

Four-bed detached house with L-shaped kitchen, and front and rear gardens


Lightwater, Surrey

Four-bed detached house with swimming pool in rear garden


Walderslade, Chatham

Four-bed period detached cottage; lots of original features; front and rear gardens


Sandwich, Kent

Three-bed detached property, large rear garden, sun terrace and integral garage


Hastings, East Sussex

Five-bed terraced house with two bathrooms and front and rear gardens


Rye, East Sussex

Modern semi-detached three-bed home in cul de sac; rear garden and off-road parking

peopleFrankie Boyle responds to referendum result in characteristically offensive style
Life and Style
Couples have been having sex less in 2014, according to a new survey
New Articles
i100... with this review
Holly's review of Peterborough's Pizza Express quickly went viral on social media
footballTim Sherwood: This might be th match to wake up Manchester City
Arts and Entertainment
musicHow female vocalists are now writing their own hits
New Articles
Arts and Entertainment
musicBiographer Hunter Davies has collected nearly a hundred original manuscripts
Blahnik says: 'I think I understand the English more than they do themselves'
Arts and Entertainment
Michelle Dockery as Lady Mary Crawley in Downton Abbey
TVInside Downton Abbey series 5
Life and Style
The term 'normcore' was given the oxygen of publicity by New York magazine during the autumn/winter shows in Paris in February
fashionWhen is a trend a non-trend? When it's Normcore, since you ask
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Senior BA - Motor and Home Insurance

    £400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

    Market Risk & Control Manager

    Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

    SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

    £320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

    Head of Audit

    To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

    Day In a Page

    Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

    Despite the result, this is the end of the status quo

    Boyd Tonkin on the fall-out from the Scottish referendum
    Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

    Manolo Blahnik: Flats, Englishness, and Mary Beard

    The shoe designer who has been dubbed 'the patron saint of the stiletto'
    The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

    Scrambled eggs and LSD

    Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
    'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

    'Normcore': Blending in is the new standing out

    Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
    Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

    New leading ladies of dance fight back

    How female vocalists are now writing their own hits
    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam