Buying 5-bed HMO for son in University?

Reply to the comment left by Richard Robinson at 11/02/2025 - 12:18
Bit confused with the “interest free loan” and “he could have £250k in the bank” comments. Are you basically suggesting you’re gifting him £250k and you’re here because you’ve not decided if this gift will be a HMO?

It's a good point regarding rent a room vs running as a business. I'm currently thinking that the annual rent will be around £15k for the 4 rooms he rents out, but excluding utilities, so electricity and oil/gas will be split equally. There are no water or sewage charges in Northern Ireland and rates are around £1,800 per year. HMO license cost is £225 per person every 5 years. There'll be a certain amount of maintenance including any certificates that are needed each year.

£15k income less £7.5k rent a room leaves £7.5k taxable. That leaves scope to earn £5k extra without paying tax, which should be OK. I'm hoping that deductible expenses won't be above the £7.5k rent a room allowance.

Reply to the comment left by Jason at 11/02/2025 - 12:56
Jason, the plan is to go with the HMO. Part of the funding will be the tax free sum from my pension and I'll gift him a small amount and loan the rest (being an old codger IHT and pensions are more of a thing for me). Some comments have said that having a HMO for your kids can be a bit of a minefield, which is why I raised the comparison of simply putting the money in the ban, rather than buying the HMO.

I've been an accidental landlord in the past and I honestly wouldn't do it again, as I think that everything is increasingly stacked against the landlord. I see this as more of a way of getting the kids on the property ladder though and I just want to make sure that I'm going into it with my eyes open. I've done plenty of research but there's no substitute for people who've actually been through it for real, so I appreciate all the input.

We know nothing about your Son and his friends.
He might be a great Landlord and his friends might pay the rent every month without any issues.
You could consider " Fused " to split the bills However I advise caution as I have never used them myself.
I have heard of other companies offering Bills inclusive packages which have come with extra costs at the end of the tenancy.
This is a huge responsibility for an experienced Landlord.
For an 18/19/20 year old student it could be very stressful 😫

Reply to the comment left by DAMIEN RAFFERTY at 11/02/2025 - 13:27
Thanks Damien, I share your concerns. Luckily my son's friend group are pretty decent and the two girls in particular are very sensible. The parents are also very supportive. That doesn't mean that it doesn't all fall apart after living with each other for 24 hours a day though.

He doesn't like the idea of paying £7k for halls and likes the idea of sorting out his own place to live in (he helped tidy up my parents house and is actually pretty hard working). It helps that we're only down the road if there's a problem and I know a good builder who can pretty much sort anything if there's an issue.

Reply to the comment left by Godfrey Jones at 11/02/2025 - 12:54
Hi Godfrey

https://www.gov.uk/tax-sell-home

You might want to check the above out living in a property for a couple of years doesn’t avoid CGT, this loophole has been closed

Reply to the comment left by Richard at 11/02/2025 - 13:17
My kids are not at uni age yet. I personally wouldn’t do what you are suggesting. I would let him get a student loan via the normal mechanism and contribute the shortfall to top up his maintenance. Let him rent on halls in the first year. Then decide who he wants to house share with in subsequent years. He might make new friends in his course who knows. Students will be students and I think you are asking for trouble.

This is worth a watch:
https://youtu.be/mO_rAsMuAlM?feature=shared

Get some professional estate tax planning too.

I wouldn't do this. My first went to university in Wales a couple of years ago. I considered doing this myself but the Welsh property rules are even worse than those in England.
If you want to help your kids out then there are better ways to help them onto the property ladder. I've been adding to their original CTFs every year for the first 18 years of their life and both my kids now have tax free ISAs worth over £40k. Once they're 18, I've advised them to transfer £4k per year into LISAs to get additional tax relief. Once I've worked out my own financial retirement needs, I'll be putting £2,880 into a SIPP for both of them (also to get tax relief) and to maximise the magic of compounding until they retire.
So with minimal annual expense, by the time they graduate they will already have £50k+ as a deposit for a house and and good foundation for their retirement income. Hopefully their further education will enable them to finance the rest themselves.

"... I honestly wouldn't do it again, as I think that everything is increasingly stacked against the landlord" understates how many experienced landlords now view all letting - there's a reason many are slowly selling up. Being a student landlord is at the difficult end. The risks of making little profit and even a loss are much greater. I suggest you search Property118 and read about the problems landlords have had particularly with students: friends who fall out, the friend who doesn't pay rent. Students find it hard enough to agree responsibility for cleaning, but for the inevitable damage... I'm not sure how joint and several guarantor liability will work in your case. Every parent guarantor I encountered refused even to consider their angel would damage a thing and then disputed joint and several liability.

Your son might do better to get a part-time and holiday job. Use the £12,570 tax-free income to pay down his loan.