Scottish buy-to-lets - especially student flats - set to rise

John Moran, managing director of Grant Property (experts in sourcing and managing student flats for investors) says that already there is a surge of interest in parents wanting to purchase flats for their student offspring to live in.

He explains: “Purchasing a property for your student son or daughter not only generates income for the student from letting out a spare room or two, but also saves the parent from funding them out of their own after-tax income.

“And with property in Scotland growing in value, thereby providing a sound and safe investment, this makes it a win win situation all round. This is already a popular arrangement for astute investors but is about to become much more popular due to the knowledge that property in Scotland is a safe bet, and as parents see it as a way to make their money work for them and for their kids. As current enquiries are proving, there seems to be a rush on to purchase now, before prices soar.”

Tax specialist and chairman of Grant Property, Ronnie Ludwig, also highlights the tax benefits of student buy-to-let and gifting a percentage to your child.

He added: “Say you have a son or daughter going to university in Scotland. If you purchase a buy-to-let property with several bedrooms and gift a percentage of the property to son/daughter - say 1 per cent (the gift should be tax free), then you can enter into a formal partnership arrangement with them whereby, notwithstanding the proportions in which the property is owned, your student offspring gets 100 per cent of the rental income generated. They live there rent free and get the benefit of the rental income from the other rooms. As students they will probably not be liable to income tax, so they get the rents tax free. Much better than the parents getting the rent, paying top rate tax on it and then supporting your child out of net 40/45 per cent taxed income. The mortgage interest will qualify for tax relief. When offspring leave university the property can either be sold and parents get 99 per cent of the capital gain, or they continue to let it out but terminate the partnership agreement so they get 99 per cent of the rents.

“Of course professional advice should always be taken from investor personal tax advisers.”