If your son or daughter is attending university you could be financially better off by investing in a buy-to-let property rather than paying rent.

Consider investing in a buy-to-let student property where your son or daughter is attending university and rather than spending money on years of rent you could let them live rent-free and simultaneously earn an income from their flatmates.

A typical 3 bedroom flat in Newcastle, a popular student city, costs on average £175,000, with an estimated rental value of £12,500 per annum – or £8,320 if you decide to let your offspring live rent free. This example relates to a 3-bed property, but the returns only improve as the number of bedrooms increase. In certain areas of Newcastle, yields can reach up to 10%.

Using the same figure, if you compare this to the alternate scenario of investing in a three-year fixed rate bond, which may struggle to offer more than 3%, you would be looking at return of just £5,250 before tax. Plus you’d still have the added expenditure of your child’s rent, which is on average £4,000 per year.

The buy-to-let market has also opened up in recent months with more ‘casual’ investors dipping their toes in market, specialist mortgage lender Paragon have released figures showing that the amount of first time landlords is increasing. John Heron, Director of Mortgages at Paragon, said: “The dynamics of the landlord market are changing. Professional landlords were typically the backbone and driving force behind growth in the market. However, in recent times, we are seeing them becoming more constrained in terms of being able to release equity and secure new finance.”

Let and Managed boardBe aware that planning constraints can often make investing in student accommodation something of a minefield, so it is important that when you invest, you are purchasing with professional advice. This is especially important with regards to issues such as the Article 4 Direction and how it affects permitted development rights of residential properties and Houses in Multiple Occupation (HMOs).

Mark Walton, Managing Director at lettings and estate agency Walton Robinson, said; “Even without the financial clout to fund a purchase outright, having enough for a deposit and securing the right buy-to-let mortgage on the right property can see you profit. With the correct guidance you can successfully make money whilst your son or daughter studies away from home.”

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