A Southampton student buy 2 let with your kids as the tenants returns 6.4%

One of my landlords who lives just outside Manchester dropped into the office last week enquiring about student property. His son has just completed his first term in Southampton Uni and is staying in halls of residence and he is trying to sort out accommodation for next year. He has looked at some properties and they are pretty bad, mould, damp, bad smells and poor décor and he was looking for some guidance.

Student properties in the Southampton market are let at rents ranging from £68 per person per week to £95pppw in shared houses plus bills. Locations vary considerably as do the quality of kitchens, bathrooms etc. It’s also hard to find a decent 1 bed unit for less than £550 per month and 2 beds tend to start at around the £750pcm, however these may be some distance from the Universities. Some private operators and the universities are offering purpose built studios at around £150 per week all inclusive, however they tend to be small at 200 to 250 sq.ft. and heavily policed – no posters on the wall, small fridges, no music etc. – not a student’s idea of fun!

One option I put on the table was to buy a unit for his son to use over the next 2 or 3 years and then either sell or keep it long term as an investment. This has many advantages including:

• You are investing in property rather than giving dead money to another landlord

• You know your child is living in a nice, safe well looked after property complying with all current regulations (fire safety, furnishings, gas, electrical etc.)

• Your will benefit from capital appreciation during your child’s time at university

• You can structure the transaction to help with inheritance tax planning which may help your child to get started on the property ladder

Here’s a nice two bed house which is only 10 mins walk to Southampton University, its 100 metres from a new Sainsbury’s and Portswood high St and Waitrose are less than 5 mins walk.

He could share this property with a friend. It falls outside of Southampton additional licencing requirements for small HMO's ( Houses in Multiple Occupation). It needs no work, has a garden and even a summer house and is on the market at £160k, I think a deal could be done at the £150k level. With each person paying £400pcm - £92pppw they would have great accommodation, no hassle and the parents would be happy knowing there kids were in good accommodation for their time at Southampton Uni. From the investment side of things monthly rent of £800 equates to a Gross Yield of 6.4% - not too shabby at all when you consider all the benefits.

Guess what?.........my landlords has booked a viewing. I hope we get asked to some of the student parties next year!

If this is something you would like to consider we can help pick the right property which will help keep the kids happy and also make solid financial sense.