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-   -   Renting to students while on the road? (http://www.horizonsunlimited.com/hubb/travellers-questions-dont-fit-anywhere/renting-to-students-while-road-66384)

Cysne 23 Sep 2012 19:35

Renting to students while on the road?
 
Hi All,

In 2014 I'm starting my trip with my girlfriend.

I've got a reasonable amount of capital, however part of me just doesn't want to spend this capital on travelling, therefore I would like to make it last longer.

So for this I've been thinking about buying two properties in a UK City with a decent student population, that I can rent to 4-5 people.

In say, hull I could buy a house with 4 bedrooms, within 1 mile of the Uni for £50,000. I could buy two with a 15% deposit on each.

A 10 year capital repayment mortgage would be around £500 maximum. 4 students paying £60 each a week, would give me £1040 a month income.
Adding bills at a cost of around £200 inc insurance council tax, repairs, then students to pay water, gas electricity, I would have £300 odd a month per property.

So lets say £600 a month income. This would account for half of our monthly traveling budget.

However, it's a slight worry leaving rented accommodation, what if something happens? Especially to students. Return on a normal rental is barely enough to cover the mortgage

Anyway, does anyone do this? I think if I bought 3-4 houses, I could have enough income to travel indefinitely and just restore them in the summer.

I think this would be far more sensible then just burning my cash, as I have saved hard for it...

Any ideas?!

Warin 24 Sep 2012 00:43

Renting …. you may benefit form a local real estate agent to take care of the day to day things. EG hot water heaters that go faulty etc.

The other thing to look at is a lease. These go for longer periods of time, for students you want a one year agreement so it takes care of the holidays when they may tend to go home (or travel) and thus not want to pay rent...

docsherlock 24 Sep 2012 00:51

Management intensive; students will wreck your properties. Not good credit risks.

You would need a good agent and tight contracts.

What would you do if you could not rent one of the rooms in each house?

Numbers are good but these are the downside risks.

markharf 24 Sep 2012 01:14

I've done this, both with students and with older folks. Neither group has been particularly more reliable than the other.

Older folks seem stable, but the biggest bind I've been in recently involved a stable, financially-secure professional family whose prime earner got laid off a few days before they were to move in. Sure, I could have taken them to court to enforce our contract....but that's not a pleasant time for anyone, and in the end I would have suffered a loss financially and spiritually for it no matter how the court case went. Plus it would have ruined my trip by making me hang around.

Students seem unstable on the face of it, but the best tenants I've had in a few decades of renting off and on were a group of students. One couple stayed three years, never missing a payment. I charged them somewhat less than market rates, and they were so happy to be getting a deal that they took care of most maintenance on their own, without even letting me know.

I would strongly advise against renting rooms. I've always rented an entire dwelling to specific people, and made them responsible for finding their own housemates. Renting rooms, there will always be someone moving out, therefore the need to interview and vet new people, take fresh deposits, sign contracts, yada yada yada. Does that sound like a carefree holiday to you? Me neither.

Don't forget to set aside money adequate for taxes, maintenance, insurance, emergency repairs, reserves against vacancies of scofflaws, etc. etc. etc. You definitely need some financial reserves in case of any form of difficulty, and you need a reliable local agent (whether professional or not) to handle whatever might come up while you're gone. These people are no easier to find than solid, reliable tenants. Plus you need a plumber, and electrician, a carpenter, and (just in case) a cleaner. Where I come from, if you can't keep the place in "fit for habitation" shape your tenants can legally withhold rent. That means if a window breaks, or the toilet clogs, or the pipes freeze or a circuit burns out, suddenly your traveling money is at risk.

Having said all that, rentals have financed parts of many, many journeys for me. They'll probably finance more trips in the future. It's not as simple as it sometimes seems, and you really need to run through the risks and benefits carefully.

Hope that's helpful.

Mark

mark manley 24 Sep 2012 13:05

Apart from the drawbacks already mentioned with the number of student places not taken up this year there is a chance you will not fill it. I also think given the potential for problems with younger people whose finances are probably somewhat precarious you really need to be there and have a fairly ruthless attitude to make sure you get your money.
I would try and get the best rate you can from your capital, perhaps some of it in premium bonds, and go without the potential headache of rental property, I also speak from experience.

backofbeyond 25 Sep 2012 09:38

I have a client at the moment who has built a business doing exactly that with student accommodation but in Manchester rather than Hull. He does get to travel a lot but it's almost all round the city trying to keep on top of maintenance and the 1001 other things that he's responsible for. It's full time, marginal on profit and certainly not something that could be sub contracted from a distance (or so he tells me).

Capital value is a major factor and in recent years that has been mainly downwards. Guessing which way things will go in the next few years really needs crystal balls but getting it right could make the difference between making a profit when you come to sell the properties or being left with a huge debt.

One of my wife's partners bought a house (in Hull as it happens) for her student son intending that subletting income would cover the mortgage during the three years degree. It did but the collapse in property values has left them with about £40,000 of negative equity (no idea what sort of house it was). That was 2007-10 but they've still got the property now waiting for prices to recover. I suspect they'll be waiting for a while yet.

martyboy 25 Sep 2012 09:42

A four bedroom house for £50k, that sounds a bit on the low side, I think you'd struggle to get a flat for that money. A quick check on prices in Hull and their asking around 90k (not sure how close to the uni) thats going on for twice the price and that equates to half the income or twice the investment for the same income. You will need to factor in things like under occupancy,maintenance,emergency repairs etc and you will be liable for tax on your earnings from the rent. You would also need to furnish the flat before you could rent it out, even using second hand gear will be a fair bit of money out. Your plan is workable for sure but do research all the pitfalls and go about it with your eyes open, the last thing you need is to be hundreds,possibly thousands of miles from home and something goes wrong that you have not accounted for,such as your clients bail out leaving you with no income and a mortgage to pay.

Bill Ryder 25 Sep 2012 15:11

We house share while we live in the house. Our house is on two levels and I fixed up two simple apartments in the lower level. We are here day to day and i take care of any maintenance issues immediately myself. The appliances are used, the furnishings are second hand and our best renters have been students that also work. They are rarely home and are focused on getting thru school. Rental management companys here take a big chunk of any profit you might be making and fix things by hiring their "prefered" fix it guys.

Tony P 25 Sep 2012 16:13

Although students are plentiful - their money is not.

In some areas it is possible to let to Local Councils under a scheme by which they guarantee the property's reinstatement to original condition at the end of a fixed term (2 or 3 years).

Central London property was part of our business and we decided our safest tenants would be young(ish) overseas professional or business couples, working in UK on a short to mid-term assignment/transfer. Employer assistance, no children, two high salaries and a desire to leave to go home afterwards. Consequently our flats were designed, furnished and located with such in mind. Seldom had a problem.

Rental voids will quickly destroy plans and projections and must be avoided.

Find and befriend a local 'handyman' to take and deal with call outs. Leaving this to Managing Agents, will only add their costs to invoices they don't worry about (OPM - other peoples money) as they direct each call, however basic the problem, to expensive contractor specialists who have them on their 'Chrismas Card List'.

Also be aware Capital Gains Tax can apply on eventual sale, as well as Income Tax on regular renting 'profits'.

Magnon 26 Sep 2012 08:51

My experience, which is second hand as it was my brother who rented his house whilst away:

Try to get recommendations for an agent, like anything there are good and bad but very few seem to be aware that you are trying to maximise your income. If they are working on your behalf whilst you are out of the country whenever something goes wrong in the house they'll find a builder/plumber or whatever to do the repairs but they'll either use one of their mates who the person who can do it quickly with no regard to cost. My brother was royally ripped off on a few ocassions. Obviously the agent still gets his full commission plus a backhander from the builder in some cases.

Rent the whole property for a fixed rent indepedant of the number of people sharing. I'm sure there are standard letting contracts in the UK that allow you to tie this up fairly well. You should normally expect each tenant to provide some kind of reference and deposit/security but if one person leaves the full rent is still due.

Students are no worse than other tenants, as with agents there are good and bad but it's not necessarily related to profession or family situation.

I believe there are some agencies which offer guaranteed occupancy etc. but I'm sure there would be a downside.

mark manley 26 Sep 2012 11:56

Quote:

Originally Posted by Magnon (Post 394003)
I believe there are some agencies which offer guaranteed occupancy etc. but I'm sure there would be a downside.

I think there are some agencies that will rent it from you for a percentage of the going rate, but guaranteed, they then rent it on for the full price, this means you get paid regardless as to whether the agent has found a tenant and gets paid or not.

You can just use agents for tenant find, they advertise it, do credit check and provide the tenancy agreement, for this they charge between 50 and 100% of a months rent. I have used this service as I have a friend who looks after my place when I am away, I also insist on interviewing all potential tenants and reserve the right to refuse any I am not happy with.


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