Home alone for students

ANYONE WHO's been a student will have bittersweet memories of a year or two spent in cheap rented accommodation. Anecdotes involve mould, cold and burglary. Alison, 28, lived in a Leeds house with four friends. "The place had no heating and was so cold in winter we stayed in bed till lunchtime." To make matters worse, one of the flatmates allowed her drug- dealer boyfriend to move in. Within days there were people arriving at the house day and night. Alison was terrified but admits the dealer had his uses: "Every other student house on the street was burgled but somehow they left us well alone."

Stories like this are enough to make a concerned parent weep. Most universities offer first-year students a place in a hall of residence or university- owned accommodation. After that, students are at the mercy of the extremely free market. We all knew the rich kids whose Daddy bought them a house to live in while they slummed it at university, but an increasing number of ordinary parents are also choosing to buy a house for a student son or daughter. This may seem a little excessive, but it is a viable and profitable alternative in many university cities.

Houses in popular student areas in cities such as Manchester, Liverpool or Sheffield are not expensive, with a simple terraced property starting at around pounds 25,000. A student owner who rents out rooms to friends may well be able to cover mortgage payments, recoup buying and selling costs, and live effectively rent-free for the duration of his or her course.

Lenders are becoming more flexible about providing mortgages to students, usually with a parent acting as a guarantor, or by granting a loan to the parents under a "buy to let" scheme. The Bank of Scotland and Woolwich have schemes aimed specifically at students or parents.

Buying can be cheaper than renting, but many parents just want to make sure their child lives in a decent property. Most student accommodation tends to be in the cheapest areas, where professional landlords can make the best returns. An extra pounds 5,000 on a mortgage gives access to the better parts of town without a huge hike in monthly outgoings.

In Manchester, for example, a two- or three-bedroom terraced house in Rusholme, a popular student area, sells for around pounds 25,000. Moving out to Fallowfield, prices rise to pounds 40,000; in Withington, an area popular with families, houses sell for between pounds 50,000 and pounds 60,000.

According to Angela Bogg, head of the accommodation office for Manchester University and UMIST, rents in the city range between pounds 35 and pounds 40 per person per week. She advises anyone buying a house for students to look carefully at the location.

A property that seems attractive to parents may not suit students' lifestyles, and could prove hard to let in the future. "You need to make sure that you are buying a house in a popular student area," she says. "My advice is to talk to the accommodation office."

The economics of buying a house for students also depends on the city. In London it can still make sense, despite high property prices, because the returns from rental is so high. The main barrier to buying in London is the cash needed for a deposit. Most second mortgages need a deposit of 20-30 per cent. With two- or three-bedroom flats in unglamorous areas costing around pounds 100,000, buying might stretch the finances.

Some families overcome this by releasing capital from their own homes, according to Geraldine Smith, senior partner at estate agents Gladstones, in Willesden Green, northwest London. Flats in the area cost between pounds 100,000 and pounds 110,000, and Victorian houses start at pounds 140,000. Rooms in shared houses fetch around pounds 80 a week, plus bills. Most purchasers, Smith says, live outside London. "Rather than have their children pay rent to another landlord or rent a grotty bedsit, they see buying as a better investment. Often the son or daughter will work in London, and carry on with the house for a few years."