One option that became increasingly popular for the parents of young people going off to study at university during the property boom years was for those parents to buy their lucky offspring their own student accommodation.
In this way, shrewd Mum and Dad would know that their child had a decent home for the duration of their college life and that they would make at least decent percentage return on their investment. Often, the young person in question would be tasked with letting out the other rooms in the house to trusted fellow student friends in return for rent – and Mum, Dad, offspring and friends are all happy with the arrangement.
With the steep rise in house prices from the mid 1990s, up to 2007, though, the returns began to make gradually less sense as rents didn’t keep up with property price increases. In other words, the rent payable of, let’s say £10,000 a year on a £100k house from the late 1990s with a gross 10% return, didn’t look quite as attractive when the respective figures were, let’s say, £12,000 on a £180,000 investment.
With the decline in property prices over the last few years, though, the generalised increase in rents, and the very low interest rate environment, the figures are finally beginning to make more sense again. It all depends on the parents’ borrowing ability (or capital), their ability to set a fixed rate mortgage deal, and the extent to which they trust their offspring to manage the place properly!
There’s no replacement for running your own numbers here – on purchase price, prevailing rent and ‘hassle’ factors. But on the latter, when your children have moved on to the great wide world of work, most universities’ property service agencies will take on the house for you in the same way as a rental agent might – thereby removing the bother (though also impinging on margins). So if you’re thinking about investing in student property for your kids – speak to the university or college’s property service people first regarding minimal requirements and the like.
Written by David, a keen financial blogger who wants people to get the most out of their uni experience. When he’s not researching everything from student to payday loans, he loves offering people advice.