Guildford in Surrey is the most expensive university town in the country*. With an average house price of £522,815 according to property site Rightmove; this town (actually a city) has seen prices increase by 26% in the last three years.
Therefore if you’re in the Buy-to-Let market, or perhaps you’re interested in buying somewhere for your child to live in while studying, property in Guildford could be a good investment.
While investing in property in a rising market is a great opportunity if you have the cash, there’s another reason to consider buying in university towns like Guildford. The rental income is not to be sniffed at; the average rental value of a house in Guildford is currently £548 per week, or if you want to rent out a room or two, double rooms in shared houses go for between £450 to £750 per month.
If you’re seriously considering investing in a property for your children to live in with the aim of seeing some capital growth, also consider the rental value of any additional rooms that can be let to other students.
Buy-To-Let Mortgages
Unless you have money in the bank, you’ll probably be looking at taking out a Buy-To-Let mortgage to fund your investment. These are different to ‘normal’ mortgages, as they don’t reflect your salary but instead the potential rental income from the property: although you may find it difficult to get a Buy-To-Let mortgage if you earn less than £25,000.
In most cases you will need a larger deposit than if you were buying your primary residence (usually 25% or more of the property’s value), and interest rates are generally higher too. However, most Buy-To-Let mortgages are interest only, so this could be a good product for you particularly if you plan to sell the property in a relatively short period of time – for example after your child has graduated.
When crunching the numbers and weighing up whether or not becoming a landlord is for you, also consider tax. To start with there is Stamp Duty, which now incurs a surcharge of 3% for people buying a second property. Therefore if you were to buy a property in Guildford paying the current average house price of £522,815, stamp duty will be £31,825. Then you must pay income tax on any rent, and finally when you sell you will have to pay Capital Gains Tax if your profits on the property exceed your personal tax threshold.
If you would like to explore the figures with a specific property value in mind, rental income and Buy-To-Let mortgage, get in touch and we can do the sums.
Without a doubt, the Buy-Let-Market has suffered some blows in recent years, especially with changes to Stamp Duty. However, if university towns like Guildford continue to sustain the growth in property prices that they’ve seen in recent years*, an investment could still be a good opportunity.
When weighing up whether a property is a good investment, particularly for the student market, the following factors will help:
University ranking: The University of Surrey in Guildford ranks 35th in the UK and 247th globally, making it a popular choice for many students. It’s also one of the UK’s leading research universities.
Student population: UofS has over 14,000 students many of whom need accommodation.
Availability of accommodation: UofS has 5,000 rooms in halls of residence, which are rented to first year students. 2nd and 3rd students need to find private accommodation off campus.
Rental values: as mentioned earlier, the average rent of a house in Guildford is currently £548 per week. Naturally student accommodation is typically at the budget end of the market, although not exclusively, local estate agents will be able to give a more accurate rental value for specific properties.
Proximity to university: when searching for property to buy for the student market, identify areas that provide easy access to the campus. The UofS is very centrally located close to Guildford city centre and therefore there are plenty of residential areas surrounding it.
Cost of property: whether a property is a good investment or not will depend on the market value, rental value, the cost of borrowing and ultimately on the market itself. While the housing market has slowed, Guildford remains a very popular town for private buyers and landlords looking for investment opportunities.
If you would like to discuss any of the above in more detail or need help finding a Buy-To-Let mortgage, give me a call and we can explore your circumstances in more detail. Call 01252 759 233 or email info@thesurreymortgagebroker.co.uk
* http://www.telegraph.co.uk/property/house-prices/university-towns-house-prices-have-risen-average-22pc-three/