Want to Become a Student Landlord
and Invest in Your Child's Future?

See also: Risk Management

Is your family now facing the buzz of A-level results day and the promise of a future that brings your child their much hoped for place at university?

If your child and family are busy waiting anxiously for results, you will see your child head off to university in just a few short weeks. Of course, whilst it's a great moment for them, you could be looking at three years of providing them with extensive financial support as a parent.

Without a doubt, one of the biggest expenses is the cost of accommodation. Rent payments certainly eat heavily into a student loan. For those who receive a minimal maintenance loan due to your household income, with no added grants or allowances, it can be a stressful time.

Of course, the total cost of advancing education at university doesn't stop at rent. There are fees for books, food, and a bit of a social life and extra-curricular activities that the student loan generally doesn't cover adequately, so how can you help?

Your first thought may be that you would help with the contributions towards their rent payments first for the student accommodation and then for a house share further down the line. But this is, in effect, giving money away each year, and there are undoubtedly more sustainable ways to support your child than simply writing them a rent cheque each year.

Could Becoming a Student Landlord Benefit Both You and Your Child?

If you have funds available for a deposit or a property to use as collateral for borrowing against, you could obtain property development finance and consider becoming a student landlord. After all, as we mentioned before rent is likely to be your child’s largest expense and this is a solution that gives you the opportunity to purchase a property, and there are a couple of ways that this can be done in addition to you as parents owning the property.

If you buy a property as a home for your own child and spare rooms are rented to other university students, the mortgage payments are likely to be easily covered by rental income, which could, in essence, be a great investment for the future, whether for your child or yourself.

Landlord Duties

Acting as a student landlord does, however come with a variety of responsibilities and legalities you need to consider. It would be wise to talk your plans over with a both your mortgage broker and your lawyer, particularly when it comes to lease agreements for students, and termination clauses in particular. Unfortunately, not every student will enjoy life at university and may drop out mid-year, which could leave you short on rent. You might also want to do some research into what types of lease student landlords offer, as it’s unlikely you’ll have the property inhabited all year round. There are also considerations as to who will maintain the property, but there are plenty of agencies you can use to manage this for you if you don’t want to get involved in this side of things.

Removing much of the financial pressures befalling many students when it comes to paying rent and getting by during their time at university is something that many parents would love to be able to do. Here are some ways that investing in property and becoming a student landlord can help achieve that.

Shared ownership

Buying a property with your child as a shared owner opens up various tax reliefs that you can benefit from. In the UK, the government's 'rent a room' scheme allows a threshold of £7,500 annual rent exempt from taxes. When your child is an owner-occupier of the property, the other rooms qualify for tax exemption when rented out. If you choose to sell the property and it remains your child's primary residence, any gain on the property value once sold is exempt from capital gains tax.

Child ownership

There is also the possibility to purchase the property for your child and for you to loan or gift them the deposit. They then use the income from the rented rooms to cover mortgage repayments. Gifting cash to your child can remove funds from your estate for inheritance tax purposes, which can be a way to see your child benefit from the money that you already have plans to leave for them, while you are alive, and it really benefits their future. You may be required to act as a parental guarantee on the mortgage, which can see you liable for any unpaid amounts, and this is a decision you may have to take some time to consider.

Moving from abroad to study in the UK?

If your child is travelling to the UK to study, now is the perfect time to consider purchasing an investment property in the UK. Since Brexit, the decline in Sterling has meant many foreign exchange rates offering favourable investment opportunities for foreign investors. So, buying a property close to a UK university will benefit your child with a home for the duration of their studies, and the rent will typically cover the mortgage when you rent spare rooms to other university students.

Properties close to universities are usually in demand with excellent occupancy rates that could provide you with income and investment opportunities long after your child's graduation. Whether your child is looking to study at a big university, or in one of the smaller university or college towns, an investment property can bring tax benefits that make them even more affordable when considering the rent payments, you are saving for your child.

However, we’d recommend you look for a broker carefully in such cases, especially if you don’t have a lot of time to visit and view properties. That way, you can maximise your time in the country and ensure you get an appropriate property. Further to this, we’d advise you to seek professional legal advice on your rights and responsibilities as a student landlord. After all, education is key to not only the student, but the landlord that oversees their property!

About the Author

Enness Global are a leading mortgage broker for prominent, high-profile, high net worth individuals. We have an envied pedigree when it comes to providing mortgage solutions for even the most complex financing scenarios, enabling us to have advised and completed on some of the biggest mortgage transactions across the globe.