Student Letting

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    Student Letting

    Can someone please guide me in property investment as I am very new and inexperienced in this field?
    I have very little savings which I am thinking of investing in buy to let property. With my savings it is difficult to find buy to let property that cover 25% deposit and after long search I have managed to find some studio apartment inside student hall in Birmingham exclusively for renting students and those apartments are managed by the university or other third party private company.
    Those apartments have shared kitchen with own bedroom with ensuite with long lease.
    I was told by the selling estate agent that there are approximately £3000 per annum charges on those apartment including ground rent, service charge and full management fees including finding student.
    The rent will cover the cost of interest only mortgage, ground rent, service charge and management fees.
    My goal is to sell this property back in 5 -10 years time for profit. . Do you think it is worth investing on those properties? If I have to buy normal property, it will take me another 2 to 3 years to save deposit.
    Those properties are very cheap and affordable for me and am wondering if there are any loopholes although selling agent will not disclose any information. Has anyone had any experience or knowledge?

    #2
    If I've understood you correctly... Once you've paid the costs you are left with no profits. There's a few things you might want to look at:

    What do you expect the market to do in that area?
    ​​​​Are you prepared to make a loss?
    How much do you earn externally - this is important as if you are a higher rate tax payer you'll only be able to deduct some of the costs... Essentially you'll end up paying tax, even if you don't make a profit
    Is the likely scenario better or worse than other options out there?
    Have you factored in the costs of purchasing, selling and stamp duty (should you make money)


    Fiid for thought... ​​​​​​There's some relatively safe investments out in the market at 6-10% at the moment.
    ​​​

    Comment


      #3
      You are breaking all the basic rules of investment. You should always retain a significant cash investment and you should diversify your investments.

      Property prices may not continue to rise (and in fact new builds, which this sounds like, tend to lose value. Note that what caused the real hardship in the great Wall Street crash was not that the stocks became valueless, but that they became worth less than the mount borrowed to buy them.

      Student lets are characterised by a high risk of damage to the property, which will not be covered by the service charge. The service charge is very high, but you may still find there are years in which you have to pay much more (e.g. they suddenly find a basic fire safety flaw).

      Comment


        #4
        Those properties sound like a terrible investment, full stop.
        For you, they are a complete non-starter as you simply don't have enough money to be involved in a property investment business.
        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

        Comment


          #5
          Thank you all for your suggestion and comments. The management fees including service charge and ground rent is £3K per annum and rental income from those flat would be around £5K per annum. It looks like I will have no control over managing this flat. I am lower tax payer and with this rental income I will be still in lower income bracket.

          I am planning to take early retirement from my current job in about 12-15 years time and looking for regular extra little rental income until I get my state pension. This is long term investment plan and at present I don't have enough deposit to buy traditional property. I will have to work another 2 to 3 years to save enough deposit to buy traditional property but price may go up.




          Comment


            #6
            You have to do a proper business plan for any property you consider and factor in all the costs - loan interest, repairs, voids, irrecoverable damage, agent fees, income tax......

            This may turn out to be the worst time to invest in btl in recent history as there are so many major factors at the moment that could affect the value of your investment

            Comment

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