Become a property owner in London

Imperial houses some of the wealthiest students in the UK. At Imperial, students are only able to live in college provided student accommodation for their first year, before moving out with friends or becoming a hall senior. As SW7 is the most expensive postcode in the UK, rent in the neighbourhood can be extremely expensive. One way some parents get around this problem is through investing in property in London. Trends are good at the moment in London, with the London Property Watch measuring 14.2% growth in house prices for a one bedroom property in London between October 2012 and October 2013.

Most universities can accommodate first years in halls of residence, but around 70% of all students in most university towns will be looking to the private sector for accommodation (Telegraph, August). According to HESA (the Higher Education Statistics Agency), in the 2011/12 academic year, there were around 2.5m students in Britain, so this would amount to 1.75m students looking for accommodation. In the past 18-24 months, there has been a 20-30% uplift in parents specifically purchasing properties for their children to live in during study. These customers are generally dissatisfied with the return on their other investments such as pensions, ISAs etc, and want something that will offer a decent return whilst simultaneously helping their son or daughter through study. Once their child’s period of study has passed, they will either sell the house or continue to rent it out for a steady income booster. These customers may already have a buy-to-let property, however will not be experienced in property investment. Key factors which they must take into account when choosing a property is the area, property type, how to finance it, how to manage it, etc. These factors coupled with the probability that the parents will be buying at a distance means that a good letting agent is recommended.

Usually a student plus around 3-5 others will live in the property, but rent will only be charged to the housemates. This is important, as there are regulatory implications for mortgages on properties that you will let to family members – by only charging rent to the housemates, the parents avoid this. A few pointers to parents investing in university digs for their son or daughter: •Most BTL mortgage lenders require the rental income to cover the mortgage interest by about 120–130%. In order to achieve a good yield, many BTL investors opt for an interest-only rather than a repayment mortgage – however, this means that the capital part of the loan needs to be repaid, either by the sale of the property or a separate ‘investment vehicle’.

•Your letting agent should be accredited by ARLA (the Association of Residential Letting Agents), NAEA (the National Association of Estate Agents) or RICS (the Royal Institute of Chartered Surveyors). This means that they will have minimum professional standards and there will be a route for redress in the case of misconduct.

•The running costs of a rental property include a list of things such as: BTL mortgage repayments, tax on rental income, repairs and refurbishments (allow for around 10% of annual rent), agency fees (varies, usually around 12% of annual rent) and Voids (periods where the property is empty – most landlords again allow for around 10% of rent, but as this is a student property there is a chance that it could be empty for as much as a quarter of the year).

Finally if you are planning on investing in South Kensington, according to the London property watch, the average cost for a 1 bedroom property in South Kensington currently is £912,000; 2 bedroom is £1.568 million; 3 bedroom is £2.256 million. Back in early 2006, house prices in South Kensington for a 1 bedroom property was just below £500,000. This can be compared with figures to properties in Hammersmith, where the average 1 room property is just less than £400,000. On top of that, as an investor, you will be coming under increasing competition from universities and colleges which are buying and building brand new student accommodation as well as experienced professionals which are snapping up the good properties intending to offer the wealthiest students luxury and glamorous accommodation.

Thank you to turnkeylandlords.co.uk for providing a portion of this information. TurnKey Landlords is a specialist buy to let mortgage broker that offer its customers expert advice based on a welath of experience and knowledge in the commercial and buy to let mortgage sector. Whilst most buy to let mortgages are not regulated by the Financial Conduct Authority (FCA). Turnkey Landlords follows FCA principles and guidelines when recommending products to all of its customers. https://www.turnkeylandlords.co.uk/