The post-matric academic year will soon begin, and with student accommodation still in short supply, many parents may be considering buying a small property for their kids.
Such a move would not necessarily be indicative of a wealthy family looking to spoil their student, but, rather, a smart investment move – if done right.
Not only would these students be sorted for accommodation for the duration of their studies, but purchasing these brick-and-mortar assets could be the start of an investment journey.
Read our latest Property360 digital magazine below
Alternatively, some parents will opt to rent a property for their children. Either way, there are certain considerations both options require, experts say.
To rent or buy?
Interestingly, Shaun Dubois, owner of Just Property in Pietermaritzburg/Midlands, says many of today’s landlords started off purchasing a property for their student children and then, when they finished their studies, they kept it and started renting it out.
“Often this was the first of many properties they purchased using the equity in the initial property and then some clever gearing to buy multiple properties.”
He emphasises though that purchasing would be for those more affluent as the cost of tuition is, on its own, beyond most people's means.
John Birkett, franchisee of Rawson Properties Claremont, points out that the decision will also depend on how long the student will be studying for. If the period of study is short and there is an intention to sell the property after the student is finished, then it might be a risky investment and a better option would be to rent.
“If the property is going to be used for a number of years by consecutive siblings or be rented out afterwards, then it is worth buying. In recent years more student parents have opted to rent instead of buy due to campus unrest and, more recently, Covid.”
Location considerations
Regardless of whether a student will live in a rental property or one owned by their parents, the same factors need to be considered when choosing an area for them to live in. The location should offer easy access to campus and be an area where other students live, Birkett says.
Dubois agrees: “The area they buy or rent in should have good transport routes or be close to the campus.”
The area should also be safe.
Type of property
While large houses that have been converted into communal student homes have become popular, he reminds parents that this does carry additional costs to maintain them.
“There are benefits but my advice would be a three-bedroom sectional title unit in a large estate. This is because larger estates often have a better economy of scales as they can pool the levy income better and often can have superior security.
The property should also offer good security measures.
Birkett says communal student houses (digs) and flats are most suitable and that cheaper options for students renting are rooms in shared properties. However, most students opt for studio or one-bedroom apartments.
“Properties with modern facilities, such as new kitchens and bathrooms, and WiFi, are most favoured.”
Parents should bear in mind that, when buying a property for their university-attending child, they also need to ensure it offers good investment potential. Therefore, he says studio and one-bedroom apartments carry the least risk and are always sought after.
Should we sell once the property is no longer needed?
This depends on the market, Birkett says.
“If there has been good growth over a short term it might be better to call in the investment, but if there is no growth on a sale, it might mean a loss of capital and so may be worth renting out until the market improves, or keep it as a long term investment.”
Dubois believes it is best to undertake an unemotional analysis of the property when considering selling or renting the property out.
“There will be a need to consider the return on investment of the property both in terms of the potential rental but also capital appreciation. As a rule, property is better to keep as a long-term investment but once the true returns are calculated an informed decision can be made.”
Many courses, however, only keep a child at university for three to four years, and if there are no siblings to take over occupation of the family’s rental property, there could be a worry about whether it is too soon to sell without losing money. But he explains that an initial “good purchase” under R1 million, meaning it will not attract transfer duty, could still offer a profit.
“Ideally though, you would want to pick up a property with a below-market offer.”
Search IOL Property to find a suitable home for your student child.
IOL BUSINESS