Buying flat for student DC experience/advice

[Sensecheckmeplease]

Anyone got experience/advice/cautionary tales on buying student accommodation and how to structure that purchase?

DS1 is 19 and in 1st year of 4 yr STEM degree. DS1 has a severe food allergy which has impacted his 1st year massively. He loves his course but he has had to move accommodation twice due to flatmates who used the allergen. He’s ended up in an extremely expensive studio flat which the university have offered he can keep for future years - but that means taking it on a long contract, so makes it even more expensive.
Now, DD (age 21) has received funding for phd at the same northern uni as DS1. They’re close, both really pleased, and immediately started looking for 2 bedroom flat options (unprompted by us). These are also very expensive, whether uni owned or private lets. It turns out that the area has a lot of landlords selling up due to interest rates hikes, so house prices are lower but the supply of rentals is lowering and therefore more expensive.
I had a windfall some years ago which we’d set aside to be deposits for our 3 DC. 2/3 of this will buy a 2 bed property outright, for about 160k, and we’ve been viewing. DD1 and DS have organised this, going to see places then taking to see their shortlist.
On instructing our solicitor, she replied asking if we’d considered settling up a trust to buy the property in our kids names (also DS2, 14), or buying it outright for DS1 and DD. The former seems too complicated but we’re seriously considering the latter. I totally trust them both and it seems to me that since morally this money is theirs, it’s fair enough for us to escape the tax implications - and also fair enough for the two of them, who get this massive advantage, to have the responsibility too. Obviously we will hold their hands through every stage, and give them enough to cover additional costs like maintenance and insurance, until they’re both working full time.
Maybe they won’t be keen if we ask them. But before we do I want to consider the benefits and pitfalls. Obviously either could drop out of course, get married suddenly, or (much) worse. But all those thing would also need to be planned for/dealt with if we owned the property, too.
Is it too much, too young, is another concern. But they both work hard academically and in part-time jobs and 80k each isn’t enough to stuff that all in and live off for their 20s.
What else do DH and I need to think through?

Anything thing: logistics. Presumably we can’t actually “buy in their name” - we’d be transferring the money to them and they would buy the property we’d assisted them to choose and bid on. They’re adults so presumably this is legally acceptable but would estate agents/vendors be squiffy about it?

Will it tie them down to staying in the area?
What if one of them wants to cohabit?
Will you be able to do something similar for your youngest?
What if one of them marries someone unsuitable and you have effectively gifted your DC £150k and they then lose £75k after only a couple of years?

I feel as if putting it into their names is a bit too much too soon.
I'd buy in your name, and take the CGT tax hit, and keep the responsibility.

Just read properly 80k each, so £160k - can hardly buy a paper bag for that round here!

If they buy in their own names now, that'll affect stamp duty down the line surely?

Too soon to tie them down to one area. Buy in your name, then sell in your name when they've left uni - basically become a benevolent landlord for them.

Oh I know - it would only buy a static caravan in our city! It is doubly extraordinary when the university have been charging us £300 a week (x48) for “prestige” (slightly mouldy) postage stamp of a studio for DS1.

Amazing too that some of these 2 bed flats for £160 were sold brand new for about that same amount in early 00s. They’ve since spiked and plunged several times, and are just now plunging again.

Original plan was to own it ourselves then sell it when they leave the area (minimum 3 years but DS thinks he’d like to stay in same
city for phd too ) then sell it and give them half the money each to buy their own place wherever they’re moving next/invest until they settle down.

Ah, I follow. Sorry to have made you repeat yourself a bit.

I would agree with pp that it's way too soon to give them that kind of money and responsibility, even if the solicitor is saying that financially you might make a saving. What if one of them wants down the line to stay in the area and the other is pressuring them to sell the house and liquidate the cash? You'll be better able to arbitrate if it's in your name and you have final say.

I guess what I want to avoid is any sense of them feeling controlled, with me holding this money over their heads to bestow on them at some nebulous time as and when they’ve proven themselves worthy. I had a wealthy family member like that, who tried to use the promise of money to stop me marrying DH. Ironically, it’s that money, which I later got as an inheritance, that is available for my DC. (I didn’t want it personally.) Having thought of it as theirs for years, without ever mentioning it, now we’ve needed to reveal it I don’t want it ruining our relationships.
ultimately, if I didn’t think they were sensible enough to navigate living together in a flat I owned, I wouldn’t buy it in the first place. Since I do, I wonder what the real difference is in its actual status as theirs being the legal situation too.

I think it's the fact that it is two of them that would worry me. If you could afford to buy each of them (& dc3 when the time comes) a 'starter property', then great.

But sharing could have pitfalls. Let's say one of them gets a new dp & moves him/her in. Sibling loathes the new dp.

Or the siblings just fall out irrevocably over something else.

Or they're still best of friends - but one gets a job the other side of the planet or wants to upsize or go travelling or...well, a 100 possibilities really.

Then what? One of them has to buy the other out - neither of them can afford to...

If you own the house, you can just be a nice landlord. If one of them wants to move, the other can find a housemate to make up the rent, or move out too & you sell the property. It just seems that this would be less hassle.

I did that at uni. It was great.
A couple of things to think about: the thing about putting it in their names is that you are then gifting them the money - might you have a use for it in future? And you will lose control of when it should be sold, they will have to agree that between them. Conversely, it is better if the property is likely to rise significantly in value as no CGT when they sell if it is still their main residence - but it doesn’t sound like it is likely to appreciate hugely.

Finally if it is a flat in a tall building be very careful about fire issues post Grenfell. That may be one reason why it has dropped a lot in value recently. Don’t go there, even if it has an ECH1 form, if remedial work has not yet been undertaken AND paid for. Safer to buy in a low rise period block with solid construction.

ttps://www.expertmortgageadvisor

I would avoid flats and go for a house using a specialist mortgage.

https://www.expertmortgageadvisor.co.uk/first-time-buyers/university-mortgages-for-students/

No advice but only to say in hindsight I wish we'd done it for DC2. He went to York. Lived in halls 2 years and then rented. After graduation he came home briefly but returned to live in York renting again for a while during the pandemic while WFH. If only we had bought a flat to begin with....

Thanks for all these points, it’s helping me interrogate my position and think it through from more angles.
They‘ve already made an agreement (back when hoping to rent together) that neither of them will move anyone else in.
Ultimately we’ll have to negotiate them moving out at some point either way. Their plan (not knowing explicitly yet that the money will be coming to them at some point) is that if either moves back south it will probably be our home for a while (near London/lots of job opportunities) in which case the other can find a roommate. If they own it then they can decide together whether to sell it or rent it out if they both move away - I don’t want the hassle of being a landlord on the other side of the country, but they might well decide to do that, to help build up a bigger deposit each for then buying separately in more expensive areas.

I think you need to include your third child somehow as well. Your two eldest get to 'own' a property that will hopefully grow in value when they sell it. Potentially by many thousands. Whilst your youngests cash is earning peanuts. Plus presumably there isn't enough to buy a second property out right? So I'd be a bit disgruntled that my elder siblings have a property to cash in as well as presumably lower university debt and I've not got that opportunity.

I think it could work but get a good financial advisor. The only issue I can see is the 1/3 of cash you're keeping back for your youngest is worth significantly more/less than the flat when they're an adult depending on property prices and what you do with that money.

Also I think they will need to put in some kind of clause that either of them can trigger a sale. Could cause friction if one doesn't want to sell up when the other wants to get their cash out.

Check out the ground rent
it’s a massive issue with loads of flats not being able to be sold due to a change in the law and with new builds only having a peppercorn ground rent
none of the flats in my sons building can be sold atm due to this
luckily he is renting the flat at a very cheap rent and hoping that it gets sorted

I would speak to a good tax accountant one who specialises in property.

It will save you money in the short term you gifting the money and them buying it, as you wont have to pay the higher rate tax (assuming you own your own home) they will also get first buyer discount.

That might screw them further down the line, when buying a property with a partner, as their partner (assuming they were buying for the first time) wont get that discount either.

It might be worth, paying out for a bit of advice on that.

Don't get it in their name - they will lose their FTB status.