# Son starting college, should we rent or buy?



## Banner13 (23 Aug 2021)

Eldest is starting college in Galway next month, we have been looking unsuccessfully for a place for him for the last couple of months and time is ticking. Landlords looking for crazy money (even compared to last year, I am told) and all want 12 month leases. We have some savings and also are both over 50 with approx 800k in pension funds. Should we be looking to buy at this stage or is the market too inflated? We have 2 other children in secondary school who may or may not want to attend college in Galway in the years to come.


----------



## Clamball (23 Aug 2021)

Would you borrow against the pension fund?  I am assuming you can’t draw down the money?  So could you get interest only until you are 65?  And they pay off balance with lump sum.   If you think your other kids will go to uni in Galway it makes sense, you would have use of it for them during their college years.  I know in times past I saw it work really well, and if they was only one child in college in a particular year the rooms were rented out to friends.  

I don’t know can you afford it if you had to do capital and interest repayments, because you won’t get a 30 yr mortgage, probably only 15.  You would need to supply some figures on affordability to know if it is a good idea.  But the value of the house is what is the value to you now.  Will it be good value for you to use for x years while the kids go to uni.


----------



## Banner13 (24 Aug 2021)

My pension is defined contribution and I am no expert but as I understand it after the age of 50 I can take up to 20% cash tax-free (up to a max of €200,000) . I don't know how good an idea this is as I do intend working for at least another 6-7 years and maybe I should wait to get my pension to as close to a €1M before taking a lump sum? It is currently at approx €550000.
As for a mortgage we have enough for a deposit (just about) and would probably be able for the payments on a 15 year mortgage of €300k.


----------



## NoRegretsCoyote (24 Aug 2021)

It depends on your income level but in your circumstances bit could make sense.

What price property are you looking at and what would you pay on rent for same property?

Are your mortgage calculations based on BTL rates of >4%?


----------



## skrooge (24 Aug 2021)

My initial thought is buying a place seems like a rather large hammer to crack a nut if the only intention is to cover your son's accommodation for college.

Firstly it is unlikely to solve the accommodation issue in the short term. The length of time it will take to find a place, get the legal and financial affairs in place and move in will likely take months rather than weeks. So for the semester coming renting is likely to be necessary.

What are your plans for the property after graduation? Sell, rent or have you or your family an interest in living in Galway? In the greater scheme of things college while hopefully a  great time in your son's life is only going to to last 3-5 years. Property as a short-to-medium term investment is generally more risky. Forgetting about your son for a second had you an interest in being a landlord?

Taking the worst case scenario he could turn around at Christmas and tell you he's not happy in Galway and wants to come home or do something else.

How do the transactions cost (buying  & selling) combined with mortgage interest compare to rent levels? For example, stamp duty will be 1% on purchase. Selling you'll likely face estate agents fees of 1.5%. there will be solicitors fees associated with both transactions also. It's not your primary residence so you will face higher BTL mortgage rates. Spread over the duration of a college course does it make financial sense?

More broadly any decisions on purchasing should probably involve an overall assessment of your financial position. For example have you an existing mortgage and how sustainable are your finances if you have to service the BTL mortgage yourself


----------



## Banner13 (24 Aug 2021)

Thanks for the replies. Lots of food for thought. 
Joint income of approx €160000, existing mortgage has about 4 years remaining. Saving around 2k per month at the moment but that may not be sustainable once son starts college.
I would be looking to hold on to the property for only as long as son or subsequent siblings need it. I have no interest in being a landlord and would sell asap.


----------



## Brendan Burgess (24 Aug 2021)

1) Forget your pension fund. You can't buy it through the pension fund and let it to a relative. Likewise, you should not make a decision on exiting your pension fund to finance a short term property investment. 

2) If you own your own home and have €800k in a pension fund presumably invested in equities, maybe buying an investment property is ok.  It's a bit concentrated in property, but given that you have a use for the property, that would probably be ok. 

3) Now, you need to crunch the numbers. 
A: What rent will you be paying for your son? 
B:  How much will a similar property cost? 
C: How much of a deposit do you have? 
D: What will the interest rate be? 
E: If you are buying a two bed apartment, will you be able to let one of the rooms to another tenant and how much rent will you get? 
E: What will the transaction costs be? 

4) What are the risks involved in buying? 
We don't allow speculation about property prices on Askaboutmoney, but it's important to point out that there is a risk that property prices may fall. This is probably balanced out by the fact that prices may rise. 

In any event, given your level of wealth, you can handle a fall in prices. 

5) What are the non-financial benefits? 
For your son, "owning his own place" would be a huge advantage.  Not dealing with landlords. Not looking for a 9 month tenancy every year.  Getting to live on his own or getting to pick whom he shares with. 

6) Encourage your other two children to study in Galway 
If you live in the general area, it would make it very attractive for them to study in Galway.  For most undergraduate degrees such as Commerce or the Arts or Science , Galway is as good as any other university.

*Conclusion - depending on the numbers *
If you can afford it, it's worth doing.


----------



## Brendan Burgess (24 Aug 2021)

Getting a mortgage.

You will require a 30% deposit. Do you have that? 

ICS does interest-only mortgages and interest-only  reverting to capital and interest. 






						Rates | ICS Mortgages | Residential Mortgages
					

The ICS Brand was established in 1864 and has remained a leading and trusted brand in the mortgage market throughout its 150-year history.




					www.icsmortgages.ie
				




Capital and interest from the start will cost you 3.95% 
Interest only will be 5.25% 
Or an initial interest only period: 4.85% 
(Rates will be a bit lower if you have a deposit of 40% or more) 

Brendan


----------



## Brendan Burgess (24 Aug 2021)

Banner13 said:


> existing mortgage has about 4 years remaining.



When banking functioned properly in Ireland, you could remortgage your home to buy an investment property. 

I wonder could you extend the term and borrow more money? 
Or switch to another lender.  
Let's say that they give you €100k. 

You would pay about 2.5% on this €100k instead of 3.95%. 
And you would have a lower Loan to Value on the BTL mortgage, so you would save a further 0.2% on €200k. 

Have a chat with your current mortgage lender in the first place. 
Then talk to a mortgage broker. 

Brendan


----------



## muinteoir (24 Aug 2021)

You could look at Daft.ie for accomodation. He could go into digs for the first year. It would be probably cheaper than renting a whole house for 12 months. And it would give you time to find a suitable house should you still want to but one. I'm not sure how many people are letting rooms these days but might be worth a look


----------



## muinteoir (24 Aug 2021)

I don't know if this is any good to you. There used you be a lot of places in Renmore and they'd be handy for GMIT.  Rahoon and Newcastle would be handy for NUIG. Easy walking distance. I think there should be buses from Knocknacarra.








						NUI Galway - Studentpad
					

Welcome to the NUI Galway student accommodation search engine. Here you can search for your accommodation in areas close to the University.




					www.nuigstudentpad.ie
				












						Property to Share in Rahoon, Galway (+1) | Daft.ie
					

Find Property to Share in Rahoon, Galway (+1). Search 8 properties and find new housemates and flatmates in Rahoon, Galway (+1) on Daft.ie now.




					www.daft.ie
				












						Property to Share in Renmore, Galway | Daft.ie
					

Find Property to Share in Renmore, Galway. Search 2 properties and find new housemates and flatmates in Renmore, Galway on Daft.ie now.




					www.daft.ie
				




I don't know if any of that is any help.


----------



## Steven Barrett (24 Aug 2021)

Banner13 said:


> Thanks for the replies. Lots of food for thought.
> Joint income of approx €160000, existing mortgage has about 4 years remaining. Saving around 2k per month at the moment but that may not be sustainable once son starts college.
> I would be looking to hold on to the property for only as long as son or subsequent siblings need it. I have no interest in being a landlord and would sell asap.


Taking on long term debt for a short term need is a bad idea.


----------



## _OkGo_ (24 Aug 2021)

Banner13 said:


> I would be looking to hold on to the property for only as long as son or subsequent siblings need it. I have no interest in being a landlord and would sell asap.



For this reason alone it would be a terrible idea. What would your plan be when your younger kids choose to go to Cork/Dublin/Limerick?? You won't have the ability to buy an apartment for each of them.

You are unlikely to buy anything for this academic year so really you are talking about buying a house with a 70% BTL mortgage for a 3 year period with all the associated costs of buying/selling, interest, insurance, furnishing, maintenance... personally I can't see that working out any cheaper than renting a room and you are totally open to property prices rising/falling if you are really against being a landlord

At the very least, you should be comfortable knowing that if property prices have dropped in 3/4 years that you will need to be a landlord for the foreseeable future until you can choose when to sell. Even a modest drop of €20-30k in property value would make this scenario an incredibly expensive solution to student accommodation


----------



## Brendan Burgess (24 Aug 2021)

Steven Barrett said:


> Taking on long term debt for a short term need is a bad idea.



But he is not taking on long term debt. He is renting money instead of property for the years that his child or children are in college.  That seems reasonable to me. 

Adding  €30k to a 20 year mortgage  to buy a new car is not a good idea. 
But adding €30k to a 20 year mortgage to buy a car is a good idea, if you pay it off over 5 years.

Brendan


----------



## Steven Barrett (24 Aug 2021)

Brendan Burgess said:


> But he is not taking on long term debt. He is renting money instead of property for the years that his child or children are in college.  That seems reasonable to me.
> 
> Adding  €30k to a 20 year mortgage  to buy a new car is not a good idea.
> But adding €30k to a 20 year mortgage to buy a car is a good idea, if you pay it off over 5 years.
> ...


He doesn't want to be a landlord Brendan and intends in selling the property when his son finishes in Galway. Where have we seen people buying property in short term intentions before? Incidentally, I have had a fair few people ask me to review properties that they still have from the Celtic Tiger. They are a disaster. They are out of negative equity because they are paying down the debt, not because the property has come back in value. All were still at a loss on the original purchase price. It is a risk to take for such a short term need. 


Steven
www.bluewaterfp.ie


----------



## Banner13 (24 Aug 2021)

Again thanks for all the replies.
I suppose this line of thinking has been brought about by the lack of availability of suitable rental accommodation in Galway city. A few people mentioned that even if I was to purchase it wouldn't be done in time for this semester which is true and would weigh against buying. 
With regard to affording, we probably would scrape together the 30% (for a €300k mortgage)  but that would leave us with little or no savings and with 2 others following we could be left in a precarious situation if they decided to go anywhere else other than Galway.  We do live in Clare as my username probably gives away but are closer to Limerick and UL would also be an attractive option.
In general, what I'm hearing is that while an investment property mightn't be a bad idea with the proper due diligence but rushing into buying a property to solve this short term dilemma might not be the best way to go?


----------



## NoRegretsCoyote (24 Aug 2021)

Banner13 said:


> With regard to affording, we probably would scrape together the 30% (for a €300k mortgage) but that would leave us with little or no savings and with 2 others following we could be left in a precarious situation if they decided to go anywhere else other than Galway.


Why €300k?

€200k would buy a property suitable for a student in Galway, with room for a flatmate too.


----------



## ATC110 (24 Aug 2021)

Let your son source his own accommodation through the numerous sites for this purpose and develop problem solving ability in the process


----------



## Laughahalla (24 Aug 2021)

What if your son decides he doesn't like Galway/College after a few months.
Managing property from an other county is a pain.

There is a few apartments for sale in Galway for less than 150k.
You don't have to buy for 300k


----------



## Mrs Vimes (25 Aug 2021)

My parents had this dilemma in the 1990s, several offspring approaching college and they didn't live in a town with a university. they decided not to buy as they didn't want us all to be "forced" to go to a particular college and, importantly, realised that late-teenagers really aren't likely to be capable of living together without parent/referees. I love my brothers (now) but the idea of living with them without someone in charge 

That said, they would have made money, but not necessarily had the family they have now.


----------



## Banner13 (25 Aug 2021)

Mrs Vimes said:


> My parents had this dilemma in the 1990s, several offspring approaching college and they didn't live in a town with a university. they decided not to buy as they didn't want us all to be "forced" to go to a particular college and, importantly, realised that late-teenagers really aren't likely to be capable of living together without parent/referees. I love my brothers (now) but the idea of living with them without someone in charge
> 
> That said, they would have made money, but not necessarily had the family they have now.


Good point, I hadn't thought about that.


----------



## ClubMan (25 Aug 2021)

To me this is the same class of conundrum as should I buy a holiday home or should I just rent somewhere as I need it. Usually the latter makes more sense unless there are other sound reasons to purchase an investment property in a particular location. I think that the Irish aversion to rent ("dead money" and all that) feeds into some atavistic need to "own" property rather than just pay as you go/need...


----------



## NoRegretsCoyote (25 Aug 2021)

Renting for your child is going to be something like €5-6k a year for four years. 


Alternatively you can rent €200k from a bank to buy an apartment. This will cost you €8-€9k a year for four years. Add to this stamp duty and EA fees, management charges, and maintenance. There is downside risk of capital loss, and any capital gain is taxed at 33%. You could make something by renting a room to another student for a (taxable) €5-€6k but you would be very lucky over four years to spend less than you would just renting as normal.


This can make sense in some circumstances of course. If you had €200k on deposit doing nothing it would be a good use of your wealth. Likewise if you lived in somewhere like Wicklow and had three kids headed to third level in Dublin with some certainty. But borrowing to make it happen doesn't stack up.


----------



## Banner13 (25 Aug 2021)

Laughahalla said:


> What if your son decides he doesn't like Galway/College after a few months.
> Managing property from an other county is a pain.
> 
> There is a few apartments for sale in Galway for less than 150k.
> You don't have to buy for 300k


Initially I was thinking house not apartment.


----------



## Banner13 (25 Aug 2021)

ATC110 said:


> Let your son source his own accommodation through the numerous sites for this purpose and develop problem solving ability in the process


Both my son and his cousin who is in a similar position have spent the last couple of months trying to rent. It really is a landlords market in Galway at the moment - they are looking for crazy money and/or 12 month leases.


----------



## Brendan Burgess (25 Aug 2021)

Banner13 said:


> they are looking for crazy money and/or 12 month leases.





Brendan Burgess said:


> 3) Now, you need to crunch the numbers.
> A: What rent will you be paying for your son?
> B: How much will a similar property cost?
> C: How much of a deposit do you have?
> ...



You should not base your decision on generalised advice such as "Buying property for the short term makes no sense."

You must crunch the numbers.  They may well back up the generalised advice.

And now you have introduced a cousin, so you are now comparing the cost of renting money with the cost of two people's rent.

Brendan


----------



## Steven Barrett (25 Aug 2021)

Banner13 said:


> Both my son and his cousin who is in a similar position have spent the last couple of months trying to rent. It really is a landlords market in Galway at the moment - they are looking for crazy money *and/or 12 month leases.*


Of course they are looking for a 12 month lease. This isn't new. A landlord isn't going to rent it for 9 months of a year.  The alternative is they will rent it for 9 months but increase the rent by 25% to make up for the lost months.


----------



## Brendan Burgess (25 Aug 2021)

Steven Barrett said:


> they will rent it for 9 months but increase the rent by 25% to make up for the lost months.



Or by 33% even? 

I would have thought that some in Galway would rent student accommodation to tourists in the summer? 

Brendan


----------



## jeffery (4 Sep 2021)

Someone might have had this idea before me but here goes and it is legal provided you tell the LL. Rent a house a cheap house with a lot of rooms then give it to your son and he rents out the rooms he does not use tax free


----------



## bipped (4 Sep 2021)

jeffery said:


> Someone might have had this idea before me but here goes and it is legal provided you tell the LL. Rent a house a cheap house with a lot of rooms then give it to your son and he rents out the rooms he does not use tax free


good idea if the landlord agreed and its only tax-free if the total from rent-a-room is 14k or less, otherwise tax is due.


----------



## Brendan Burgess (4 Sep 2021)

Does rent a room apply here? 

If I have €1,000 a month in rental income and I pay €1,200 a month in rent, then I am not making a profit, so there is no tax liability. 

And Revenue is not interested in such schemes anyway. They would look at this as house sharing. Unless the guy is paying €1,200 in rent and receiving €2,000 a month in rent. 

Brendan


----------



## NoRegretsCoyote (4 Sep 2021)

Isn't rent a room only available on your PPR?


----------



## bipped (4 Sep 2021)

NoRegretsCoyote said:


> Isn't rent a room only available on your PPR?


But it would be the son's PPR so that's allowed afaik. If it was a 3 bed house then the son could let the other two rooms at up to 7K pa each


----------



## Roro999 (4 Sep 2021)

bipped said:


> But it would be the son's PPR so that's allowed afaik.


That's surprising if that's the case.  So a house one does'nt own can be deemed one's PPR.


----------



## bipped (4 Sep 2021)

Roro999 said:


> That's surprising if that's the case.  So a house one does'nt own can be deemed one's PPR.


Afaik it needs to be your sole or main residence.


----------



## presidenttttt (5 Sep 2021)

A family member bought in Galway for their offspring when they went to college there. They held the property, a house, for several years after college was finished though, and I think that would need to be the plan, as you can’t assume any major capital gain. 

Never an issue being rented, offspring will sort it with good eggs for their time there, and often those good eggs will sort out the years that follow.

In addition to financial sense it is nice to know every year that you don’t have to worry about the rat race to find a place, and that the place is safe and you won’t get stuck with some bad eggs partying/drugs/dirty etc

The house is very near the college and currently for sale. OP is correct with their 300k rough figure for a house close to a Uni.


----------



## peemac (5 Sep 2021)

Plenty of purpose built student accommodation showing on daft.
Yes it's a little on the pricy side, but it is inclusive of all the standard bills and it's rentable for 9 months.
You are looking at €8,000-€9,000 all in.

Stress free - and walking distance to the college


----------



## PaddyBloggit (5 Sep 2021)

peemac said:


> Plenty of purpose built student accommodation showing on daft.



Yes, but a lot are full when you visit their respective sites.


----------



## Black Sheep (5 Sep 2021)

We did this 25 years ago when our kids were at college in Dublin. I'm not sure I'd do the same thing again though it has worked out quite well for our daughter who still lives there with her husband and children who will shortly be going to college.

You need to look at the long term. For us to sell or even give it to her we would be looking at a huge chunk of capital gains tax.

In the shorter term you would need to think about your kids sharing a house together. They may love each other but they may not love living together. They may want to expand their wings in different directions


----------



## Thirsty (5 Sep 2021)

bipped said:


> Afaik it needs to be your sole or main residence.


Yes; and you don't need to own the property to avail of rent-a-room


----------



## Ravima (5 Sep 2021)

consider buying in a student appartment complex?? you will buy 2/3/4 bed and will have income from the other beds. you could then sell after college.


----------



## NoRegretsCoyote (6 Sep 2021)

Black Sheep said:


> 'm not sure I'd do the same thing again though it has worked out quite well for our daughter who still lives there with her husband and children who will shortly be going to college.
> 
> You need to look at the long term. For us to sell or even give it to her we would be looking at a huge chunk of capital gains tax.


You need to be careful about this as a tax liability could build up.

If the house is occupied for free or well below market rates your daughter is using up part of their lifetime CAT threshold. See [broken link removed].


----------

