UK Landlord Forum / Life

Hi,

I'm new here. Please be gentle. I am a BTL investor of 25 years, so not a complete newbie, but have only ever invested in single occupancy ASTs.

My eldest child is off to University this month and I am considering purchasing a property as an investment that would also save them a lot of rent over the 2nd and 3rd years of their studies.

The property I am looking at is in Wales and requires refurbishment. Once complete it would comfortable house 3 (possibly 4) students. One of these would be my child who would pay no rent but I would expect them to manage the other tenants, who would most likely be their friends.

I assume we would need tenancy agreements for each of the other tenants. Is my understanding correct that if there are only two others (and I don't need a tenancy agreement for my own offspring) then HMO rules don't apply (but they would if I had three other tenants)? If I wanted to sell afterwards having it compliant as a HMO would obviously be useful for future landlords who don't need to house their own sprogs for free. Other than registering with the local authority, what are the main requirements of a HMO? Is it just smoke alarms and fire doors?

Finally, what are the council tax rules on empty properties in Wales? Assuming the purchase completes in the next few months, it would not be occupied until Sept 2024 after the refurb. I have heard stories that in Wales they charge 300/400% CT on empty properties/2nd homes. Is this likely to be an issue?

TIA

HB

It varies by area but yes, council tax on second homes can be pretty high in Wales, particularly in the tourist hotspots. Whereabouts are you looking?

It feels like you'd be doing things the hard way, having to supervise the refurbishment and then manage student tenants from a distance. Admittedly, it's a fairly well-trodden path but I think if I were going to venture into student letting, I'd start a bit closer to home. If you're effectively spending year 1 on the refurb with all the ballache and no income, getting a bit of rent in years 2 and 3, and then an uncertain plan thereafter, are you really gaining anything?

Don't do it. You're buying a property to save on rent for your daughter and will have random students (to you) living in 'her dads house' making it awkward at some point (taking one of her friends to court wouldn't be a nice experience I'm sure)

Buy another rental property, a 'normal' rental property and use the income from that to pay your daughters rent.

Becoming a landlord in Wales right now is a bit of a nightmare, and you would need some serious training and preparation. I'm quite an experienced landlord and I wouldn't let a property there. And managing an HMO anywhere isn't for the faint hearted.

Based on what you've said it would be an HMO from the start (even if it didn't need licensing).
The requirements for an HMO are beyond smoke alarms and doors, but that's probably a lot of the initial stuff to set up.

I'd not do this myself.

Thanks for the feedback. Certainly not as positive as I'd hoped.

A bit more detail on my motivation...
1. The primary reason for the purchase is that I see a significant potential for capital appreciation after refurb, even with the current state of the market, rather than rent saving.
2. I have heard horror stories from parents of university students who have to act as guarantor for their child on a joint and severally liable basis, which includes tenancies of their friends that the parents have not even met. This prospect terrifies me.
3. I would consider making the purchase even if was just to house my own child rent-free for a couple of years due to points 1 & 2 above.
4. The letting to other students would be a bonus in terms of income but also to enable said child to enjoy the full university experience of living with their friends.
5. The HMO question was really whether it applies when there are three residents but only two tenancy agreements (I thought HMO only applied to 3 or more unrelated tenants with 3 or more separate tenancy agreements). Perhaps it would be an option for just one friend to move in (the third bedroom is quite small anyway).
6. The CT question isn't a critical one  - in the old days CT was avoided by not having a kitchen and therefore making the property 'uninhabitable'. Is this still the case? Since a new kitchen is required, I could rip out the kitchen and only install new one in the summer shortly before occupation.

Thanks.

1 - No comment
2 - Many (most?)  student lets address that issue by limiting the guarantor to only part of the total liability. Guarantor agreements are mostly moral pressure, rather than actually enforceable against strong opposition.
3 - No comment
4 - No comment
5 - Three or more residents in more than one household is an HMO. I'd query the "full university experience" if your son is the "owner / manager" of the property.
6 - Councils have different policies. Wales is particularly hostile to non-local resident owners (in my opinion).

Quote from: HouseBuyer on September 06, 2023, 10:26:07 AM
A bit more detail on my motivation...
1. The primary reason for the purchase is that I see a significant potential for capital appreciation after refurb, even with the current state of the market, rather than rent saving.
2. I have heard horror stories from parents of university students who have to act as guarantor for their child on a joint and severally liable basis, which includes tenancies of their friends that the parents have not even met. This prospect terrifies me.

It seems like you're disproportionately worried (terrified?) about the possibility that you might be on the hook for a bit of extra rent if one of your child's flatmates drops out and their guarantor won't pony up and the remaining flatmates can't find somebody else to take the room.

Compare that to the costs and risks of developing a property miles from home (I don't know how far but I assume it's a fair old way). Do you know a good set of reliable trades in the area? How sure are you of your refurb costs? Once you've got the property finished, you get to play the flaky student tenant game from the other side for a few years, and then sell into an uncertain market that's currently falling.

For my money, I'd see the second scenario as the riskier option. I understand the temptation: thirty years ago I was a student in Aberystwyth and from time to time I see a student property on Rightmove and my heart says, "wouldn't it be nice..." and my head says, "... no, you numpty: it would be an expensive ballache"

Have you tried looking on the relevant council's website for their council tax rates and policy? Here's Ceredigion, for example: https://www.ceredigion.gov.uk/resident/council-tax/council-tax-rates/

I rent a house in Wales but bought my last one in England due to legislative changes. You'll have to get accredited to be a LL in Wales.