The Daily Telegraph - Saturday - Money
Buy-for-uni as students turn landlord
1 Lancaster University rental yield 3 University of St Andrews 4 University of Loughborough rental yield 7 University of Oxford rental yield 2 University of Bath rental yield
rental yield 9 Imperial College London (SW7) rental yield
offers buy-for-uni mortgages, said the most popular cities for student landlords were Bath, Bristol, Sheffield and Nottingham.
Applicants do not need any income of their own, as affordability tests are based on the rental income generated by the other tenants. However,
5 Durham University rental yield 6 University of Cambridge rental yield 10 London School of Economics (WC2) rental yield 8 University College London (WC1) rental yield
parents must act as guarantors and cover any shortfalls if tenants fail to pay their rent on time.
The deposit – typically 20pc – can come from several sources. Students may have received an inheritance from a family member, been given cash for their birthday or the parents could gift the deposit for the purpose of buying the house. On graduation, the property can be sold or a standard residential mortgage can be taken out.
Loughborough Building Society has become the latest lender to target students with buy-for-uni deals and while it remains a niche market, experts predict the sector will grow as students seek fresh ways to cut the cost of higher education.
Chris Sykes of Private Finance said: “It is very specialist, but when one lender comes out with a new idea, others tend to follow.”
A student in a typical university city could make significant sums by becoming a landlord, according to analysis by Private Finance for Telegraph Money.
It compared two similar properties located close to the University of Manchester and found that students could save £20,160 over three years by buying.
A room in a three-bedroom house typically costs £500 per month, equivalent to £18,000 in rent over the course of their studies. By comparison, buying the house, worth £250,000, with a £50,000 deposit, would generate the student a £2,160 profit over three years, based on them renting two rooms out to friends. This assumes mortgage payments of £765 a month, factoring in bills and fees.
The student landlord can also offset mortgage costs against tax, further increasing the profit.
Becoming a student landlord is not for the faint-hearted, however, as they will be required to maintain and repair the property.
Interest rates are also higher than typical buy-to-let deals, with rates at Loughborough starting from 4.59pc.
Mr Sykes said: “The student will also be using up their firsttime buyer stamp duty exemption. This could cost them further down the line. For example, if they went to university in a cheap area, used up the exemption and then moved to London, they could be forfeiting a large sum.”
Matt Richardson, of SpareRoom, said most students would prefer to avoid the stress of buying.
“Home ownership is still the goal for most people, but renting during university remains popular because of the flexibility it offers,” he said.
“You are not tied to a specific area, and you also get peace of mind if something goes wrong, as it is your landlord’s responsibility to fix a broken boiler or washing machine – and they have to foot the bill.”
Other options for students looking to buy during university include “joint borrower sole proprietor” mortgages, which allow young people to buy alongside their parents. The parent is not named on the property deeds, only the mortgage contract. This means parents are not liable for any stamp duty (far higher if they already own a property) and their children receive their first-time buyer’s exemption.
Energy customers were charged £173m to stop wind farms from supplying too much power in the 12 months to April and the figure could grow “exponentially”, experts have warned.
Known as “constraint payments”, these charges currently add around £6 to the bill of every household in Britain.
They are made by National Grid to incentivise wind farms to take back energy when more energy is generated than can be stored, usually as a result of higher wind speeds. This problem has increased rapidly in recent years as more of Britain’s power has come from renewable sources.
Many of the payments are made to wind farms in Scotland, owned by the likes of Scottish Power and SSE.
Tom Edwards of Cornwall Insight, an energy consultancy, said: “National Grid plans to improve the network but
it will cost a lot of money and take time to build.”
A National Grid spokesman said constraint payments were “the most economical way to run the system, significantly cheaper than the cost of building more infrastructure”.
Ben Guest, a specialist in renewable energy companies at Gresham House, the fund group, warned that the bill to customers could exceed £1bn in the next few years as more wind farms were built. He said one solution would be to provide batteries, which could store the excess electricity until the network could handle its transfer.
National Grid is not allowed to own batteries because of regulatory constraints, so the burden falls on the Government. Mr Guest questioned whether it was doing enough. “They are crossing their fingers and hoping they show up [from the private sector],” he said.
A spokesman for the Department for Business, Energy & Industrial Strategy said: “Our renewable energy market is thriving – and we are investing heavily in battery technology to improve electricity storage, including through the £274m Faraday Battery Challenge and a £20m fund to develop largescale alternatives to conventional storage.”