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My daughter is starting Uni in October and I am looking at buying an HMO to help with the costs. I've looked into student mortgages with parent guarantor and they seem only to be available after she's spent a year at uni. The interest rates are poor too although there is the advantage that rooms can be let under the rent a room scheme at no tax. My other option is to buy the property through my company with an HMO mortgage. Then presumably I could pay my daughter a fee for managing the property and I see no reason why she could not also live in it as it will be owned by a separate entity. Any surplus profit would be retained for further purchases or paid into my pension. I'm also wondering if it would make sense for her to be a shareholder for succession purposes. I imagine there are other PT members who have already been through these thought process and I'd be interested to know what else I should be considering and what others have done.
Hi. So I can't comment with add much experience as some posters as I'm fairly new into investing.But, I have just bought a student HMO through a limited company and your post made me reflect on what I'd done. Couple of observations that may help with your thought process 1) Time to complete. If you're daughter is starting in October you've got two months to turn around a sale and get a house ready. Firstly applying for ltd company hmos are quite lengthy, won't say it can't be done but you're putting time pressures on yourself. Have you got a house in mind? If not you'd have to complete viewings, offers, offers accepted, application with lender, Lender will likely ask for independent legal advice so you'll need a solicitor set up, valuation, consideration of the chain from the vendor, valuation, conveyancing etc... 2) Then if you're letting to other students you need to advertise and get them in. It's right at the end of the season, so unless you have people lined up there may be a challenge sourcing tenants, which could lead to void periods or a significantly reduce price in order to ensure its let. 3) Is the university city near you? If not there could be a lot of travel backwards and forwards to set it all up.
Your post doesn't say any timescales other than this October so thought I'd just share what I'd been through in case it helps.You could consider setting it up for next year, giving you more time to make a decision.
Best of luck
" My daughter is starting Uni in October and I am looking at buying an HMO to help with the costs "
I would say that the HMO will cost you a lot more for the time that your daughter is in Uni than you would save.
Let's just say the rent is £500pm. so that's £6k pa. Let's round that up to £25k for the whole Uni process.
You won't have got your costs back by the time she leaves, let alone have made any money.
Unless you want to do this long term I wouldn't bother. There's also the factor of most students start their first year in some sort of halls/PBSA where they meet their friends, who they then move in with for year 2 onwards. You'd be controlling that factor which I personally don't feel is good as it's up to her to meet people she'd want to live with rather than having in the back of her mind the fact it's your house. It will take some of the fun out of it I'm sure.JBZ has also mentioned now is not a good time of year to be buying, so if you do it in time for next year you'll only have 3 years approx. to get your costs back.There's so many other factors to running a student HMO which you'll probably know by the end of your 3/4 years, but not at the start!
As an investor I'm sure there's other ways you can think of to earn the costs of her going to Uni?
Thanks JBZ and Adam. All good things to think about. My general philosophy is never to sell an investment unless there's a very good reason because the longer you own a property the better the gain, so I'd be looking at this as a lifelong investment. The property I have in mind needs a bit of work in any case as it's not currently set up as an HMO so I wouldn't expect it to start earning straight away and it would be good for my daughter to spend the first term in halls. I don't find single lets challenging anymore and I'm hoping my daughter will be able to use the HMO as a case study. If I don't buy a student HMO I'll buy something else.
Alison, I assume you know all about Article 4 and HMO licensing etc?
Estate Agents will not tell you about this if you don't already know.
For student lets, location is very important. That's why most uni towns have student ghettoes.
I suggest you tell us which city your daughter is studying in.
There's bound to be a student landlord on here who operates there.