Specific Student Buy to Let Mortgages
However, a few lenders have devised specific student buy to let mortgages to enable investors to get into this market. Some will lend up to 100% to buy to let investors for their son or daughter, who then lives in the property while at university.
Because mortgages are arranged in the child's name with a parental guarantee for repayment, parents should not have to pay capital gains tax the profit they make, unlike any other second home. And income received belongs to the student, who can often offset it against their personal allowance.
Parents must own their own home, and be prepared to put it up as collateral for the rental property. And with the owner living in the property, there's one less tenant's rent coming in every month to pay off the mortgage.
Houses of multiple occupancy (HMOs)
An HMO is a private rented property let to three or more tenants who form two or more households. It refers to houses or flats in which the various households have shared kitchen, bathroom or toilet facilities and can also include houses or flats which have been converted into bed-sits or non self-contained accommodation. Obviously this applies to many Buy to Let properties, for example, student accommodation.
HMO licensing
Licensing for HMOs, introduced in 2006, means that landlords have to make sure that their properties, and the person managing them, meet particular criteria.
Last April, the Government enforced mandatory licensing for a sub-group within HMOs, with the aim of raising the standard of accommodation for people living in such properties.
The rules are fairly complicated, so landlords need to look at them closely. It is now compulsory to licence shared accommodation of three or more storeys which is occupied by five or more people who live in two or more separate households. A household can be made up of two people who are married or are civil partners. The household may also be made up of people related to each other, or may include nannies or other domestic staff living with the family. This mandatory licensing does not apply to all HMOs - just those that fulfil the criteria above.
However, in addition to mandatory licensing is an extra licensing scheme that some councils may employ. So your council may have additional licensing over and above mandatory licensing and covering other types of shared accommodation - for example properties with less than five tenants may still require a license.
Landlords of an HMO that requires a licence will have to apply to their local authority, and it is granted on payment of a fee and if the property in question stands up to certain standards. For example, the property needs to be reasonably suitable for occupation by the number of tenants allowed under the licence and abide by minimum prescribed standards. These include the number, type and quality of shared bathrooms, toilets and cooking facilities. Criteria also cover the competence of the person proposed to manage the property. You should contact the local authority where you intend to purchase for more information.
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