With rental yields in many university towns exceeding the average and as rents continue to rise, more parents are considering buying a property for their student offspring.
However, investors should take heed of some key advice to avoid the pitfalls, according to Haart estate agents, which has issued the following guidelines:

 

Reduce your taxes

If purchasers opt for a buy-to-let mortgage, they will need to find at least 25% deposit. They will also have to pay 20 per cent capital gains tax on any profit over their allowance when they come to sell the property.  However, acting as a guarantor and co-buying the property with your daughter or son would mean you not only avoid capital gains tax, but benefit from a lodger tax exemption of almost £400 per month, provided your child lives in the property.

Watch out for regulation requirements

If the property has more than five bedrooms or is a three storey building, it will need to be regulated under Houses in Multiple Occupancy (HMO) laws. This will involve obtaining a HMO licence, fire licence, installing an integrated smoke detector and fire proofing ceilings. This could set the purchaser back £8,000 - £10,000. However, regulations differ from town to town. Buyers should always contact the local council to confirm the local requirements.

Room for a profit

Large double bedrooms are in demand with students. As a result, period properties, which usually consist of large sized rooms, are highly sought after. If there are more than four bedrooms, an extra bathroom will be high on every student's wish list.

Avoid student ghettos

With supply outstripping demand, you are much less likely to command high rental values in areas that are saturated by student properties. Homes that are further away from the university and nearer the town centre are growing in popularity.

Students seek quality

Standards have moved on from the sitcom ‘The Young Ones'. They are demanding much better quality accommodation. As a result, well presented homes rent best.

Check the competition

Before purchasing a property, check if the university is planning to expand the student campus. This will have an impact on the supply and demand ratio. However, there will always remain an interest for properties outside the university campus. 

Convert property to maximise returns

Buying family homes that can be converted easily into a property suitable for students will allow landlords to maximise their investment returns. As long as there is a kitchen and a bathroom every other room can be turned into a bedroom. However, be aware that converting a loft of a two storey property will mean the property is reclassified to a three storey building and will require an HMO regulation, although, if your son or daughter co-owns the property and resides in the conversion it would be exempt.