Now that your child is flying the nest, it’s time to consider how you can best assist them financially. With students now expected to graduate with an average of £50,000 in student debt, any money help from their parents can make a big difference. Many parents will consider contributing to tuition fees or rent, but have you thought about buying a house for your child at university? It might seem outlandish at first but we believe that for some families, it makes sense. A good property finder will be able to advise on your unique situation.
Paying Tuition Fees versus Buying A House For Your Child At University
At the Buying Agent Partnership, we would argue that you and your child would derive greater long term financial benefit from purchasing a property than paying off tuition fees. Whilst £9,250 in fees per year is an intimidating number, it is important to take the repayment system into consideration.
Under the current system, repayments are graduated in line with earnings and all student loan debt is written off after 30 years. Only the highest earners will ever back the full loan and accumulated interest. In fact, the Institute for Fiscal Studies (IFS) estimates that three quarters of students won’t pay it all off. Given the possibility of the debt being wiped, we believe it would be a better use of your money to give your child a more tangible asset that can generate its own return.
Putting Your Money To Good Use
Buying a house for your child at university can be a real investment opportunity, especially in comparison to the option of renting, which delivers no return. In cities with fast-rising house prices, such as Oxford and Bristol, the initial cost will be high but you’re almost guaranteed to see a good return upon selling.
It is a similar situation in the university towns of the south, like Guilford and Exeter. Between 2014 and 2017 (the length of a standard degree), there was a 22% average rise in house prices in the UK’s university towns. That translates into a £39,000 increase. Interestingly, by selling at that level of profit you would be able to pay off your tuition fees. Two birds with one stone!
Cheaper locations in which to buy property include Manchester, Aberdeen and Birmingham, all of which boast excellent universities. Our property finders can help find suitable properties in all of these locations.
However, you don’t have to wait until selling to start recuperating your money. If possible, when buying a house for your child at university choose one with multiple bedrooms. That way you can let them out to other students. Your child won’t have to live alone and the extra income will help cover the mortgage interest costs. Just ensure that any additional bedrooms are of a good size so that students can study comfortably. It’s a way of making money whilst ensuring that your child feels safe and secure.
Given the nature of university term times, the property may lie empty for weeks at a time throughout the year and particularly during the long summer. You could either use it for your own purposes e.g. holidaying in London, or rent it out to short term users. We’d recommend targeting individuals attending summer schools, conferences or research session at the university.
Once your child has graduated from university, they may wish to take over the property themselves and continue to live in the area. Otherwise, you can either choose to simply sell the property or use it as a buy-to-let. Choosing the latter option and waiting a few extra years to sell, in the current property market, will likely result in a greater profit margin.
The Buying Agent Partnership can help you find the ideal property for your child, close to a university but also able to deliver a return on investment. Contact us on 0330 223 6339 to discuss how we can help you.