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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 buy-to-let student housing.

The uncertainty of the current economic climate, and the low cost of housing at the moment, provides the perfect opportunity for parents to find a cheap deal on a second property. However, as the new academic year starts in a few months, it is important to move quickly to secure a good investment.

The student housing market is a resilient one right across the UK, as there is always a massive demand for good quality housing to accommodate the thousands of students who flood cities during term time. With more students than ever before now attending university, there is a severe shortage of property, as many universities are already near capacity.

There are many benefits which you could take advantage of when purchasing 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.

First time buyers also benefit from paying no stamp duty on property under £250,000 at the moment, though this could change when the emergency budget is announced.

Parents could remortgage their house 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 property.

Location is a key factor in property buying. Parents should only consider purchasing property in dense student populations, in areas where nightlife is lively, and where there is easy access to campuses and colleges. We have two universities on our doorstep here in Newcastle, attracting students from all over the UK and beyond. Durham, one of the best universities in the UK, is close by, and Sunderland and Teesside universities also offer opportunities for cheap investment in property. Students generally pay between £50 and £80 a week for their rent, depending on the location - but this can exceed £100 a week in London.

It is recommended to purchase a house rather than a flat, as students enjoy the greater sense of community that a shared house provides. 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, whilst 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 property prices are down, but remember that property doesn't work as a short-term investment. It is a long term commitment which will require ongoing maintenance, 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. 

For further information about how Alok Dhanda can help you with your personal or business planning needs, contact Dhanda Financial, 52 Dean Street, Newcastle upon Tyne, NE1 1PG, telephone 0191 255 8960, or email alok@dhandafinancial.com

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