Son starting college, should we rent or buy?

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Allpartied

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Can I ask how this scenario worked out for the poster. And put my own situation up for discussion.

I find myself in a similar position. I have four daughters, all close in age. Three will be in Dublin, from September 2022 and when one finishes in May 2023, another one will be starting. So, assuming the youngest goes to Dublin too, it looks like it would be a no brainer for me to buy a small property.
Renting for the next three years, for three children. Then renting two years for two and one year for one. So five years of renting in Dublin.
The cheapest rental, onsite accomodation, is 7k per year, so that is 21k per year, for three years. The cheapest rental apartments in North Dublin are 2k per month, with most demanding a 12 month contract.
I could buy a nice 1 bed apartment, with big sitting room, for 190k. This would, easily, accomodate three sisters.

With a 60k deposit that would leave 130k mortgage.

A couple of problems.

I am 56.
My salary is 80k, gross. There is capacity for contract work, if needed, which can get another 10-15k.
I have a small mortgage ( 50k) left on my PPR, paying 410 per month.
It will only work if I can get an interest only mortgage.
By putting a 60k deposit down, I would deplete my savings. I would have about 25k left.

Are interest only mortgages available for this type of scenario, or would I have to classify the mortgage as Buy to Let?


As far as I can see, if I am paying interest only on 130k, that would be about 6k per year, as opposed to 21-25k per year.
Over three years, that is a saving of, at least, 15k per year. 45k over the three years and 8k for the fourth year and 1k for the final year.

So, buy the property, use if for five years and then sell. If I get back what I paid, I'm still quids in.
I retain my 60k deposit, which I would have spent on rent over the years.

The only risk is a catastrophic property collapse ( 30% or more) .



Am I right, or have I missed something?
 
Cannot answer on the financials but this could prove a popular move with the way rents are going. Certainly having so many of your children in one university location is a big incentive.
 
Allpartied said:
Can I ask how this scenario worked out for the poster. And put my own situation up for discussion.

I find myself in a similar position. I have four daughters, all close in age. Three will be in Dublin, from September 2022 and when one finishes in May 2023, another one will be starting. So, assuming the youngest goes to Dublin too, it looks like it would be a no brainer for me to buy a small property.
Renting for the next three years, for three children. Then renting two years for two and one year for one. So five years of renting in Dublin.
The cheapest rental, onsite accomodation, is 7k per year, so that is 21k per year, for three years. The cheapest rental apartments in North Dublin are 2k per month, with most demanding a 12 month contract.
I could buy a nice 1 bed apartment, with big sitting room, for 190k. This would, easily, accomodate three sisters.

With a 60k deposit that would leave 130k mortgage.

A couple of problems.

I am 56.
My salary is 80k, gross. There is capacity for contract work, if needed, which can get another 10-15k.
I have a small mortgage ( 50k) left on my PPR, paying 410 per month.
It will only work if I can get an interest only mortgage.
By putting a 60k deposit down, I would deplete my savings. I would have about 25k left.

Are interest only mortgages available for this type of scenario, or would I have to classify the mortgage as Buy to Let?


As far as I can see, if I am paying interest only on 130k, that would be about 6k per year, as opposed to 21-25k per year.
Over three years, that is a saving of, at least, 15k per year. 45k over the three years and 8k for the fourth year and 1k for the final year.

So, buy the property, use if for five years and then sell. If I get back what I paid, I'm still quids in.
I retain my 60k deposit, which I would have spent on rent over the years.

The only risk is a catastrophic property collapse ( 30% or more) .



Am I right, or have I missed something?
Click to expand...
Another option to consider if you have 3 children going to college at the same time that if your income is under 60k you dont have to pay the student contributions, if its under 55k they will each get 1.6k of a grant as well.
You could put 1/3 of pay into pension to reduce income and if paying 40% rate of tax it will cost 15k but you will save close to that on fees plus grant.
While increasing pension pot by 27k yearly.
 
Allpartied said:
Are interest only mortgages available for this type of scenario, or would I have to classify the mortgage as Buy to Let?
Click to expand...
Any mortgage that is not your PPR will be at BTL rates and yes there are options to get it as interest only particularly from the non bank lenders

Allpartied said:
The cheapest rental, onsite accomodation, is 7k per year, so that is 21k per year, for three years.
Click to expand...
Allpartied said:
I could buy a nice 1 bed apartment, with big sitting room, for 190k. This would, easily, accomodate three sisters.
Click to expand...
But more importantly, you are comparing apples and oranges to justify the savings. 3 sisters sharing a one bed apartment is miles apart from on campus accommodation.

On campus accommodation is probably a single room each sharing with friends or other students. It'll give them some independence

3 sisters living in a one bed apartment sounds awful. No privacy, no space, no independence. You need to be realistic about what university is, its not just about a degree. They will meet friends, boyfriends/girlfriends along the way and they need to be allowed behave like an adult

If you still plan on going the route of buying an apartment, it should be a 2 bed minimum.

It would be a much better idea to sit your daughters down and explain to them that they need to work part time to cover the cost of accommodation. When you paint the picture of the 3 of them sharing a one bed, I think they will be straight out job hunting...
 
Cavanbhoy said:
Another option to consider if you have 3 children going to college at the same time that if your income is under 60k you dont have to pay the student contributions, if its under 55k they will each get 1.6k of a grant as well.
You could put 1/3 of pay into pension to reduce income and if paying 40% rate of tax it will cost 15k but you will save close to that on fees plus grant.
While increasing pension pot by 27k yearly.
Click to expand...
Does your under 60k income for 3 children re no student contribution apply in the case of 1 child too ?
 
_OkGo_ said:
Any mortgage that is not your PPR will be at BTL rates and yes there are options to get it as interest only particularly from the non bank lenders



But more importantly, you are comparing apples and oranges to justify the savings. 3 sisters sharing a one bed apartment is miles apart from on campus accommodation.

On campus accommodation is probably a single room each sharing with friends or other students. It'll give them some independence

3 sisters living in a one bed apartment sounds awful. No privacy, no space, no independence. You need to be realistic about what university is, its not just about a degree. They will meet friends, boyfriends/girlfriends along the way and they need to be allowed behave like an adult

If you still plan on going the route of buying an apartment, it should be a 2 bed minimum.

It would be a much better idea to sit your daughters down and explain to them that they need to work part time to cover the cost of accommodation. When you paint the picture of the 3 of them sharing a one bed, I think they will be straight out job hunting...
Click to expand...
Thanks for your reply. It is just an idea, at the moment, but I will have to move in the next few weeks, if it is viable.

To be fair, they are all working and earning during the summer/weekends. They pay for everything themselves, clothes, food, nightlife, travel and books. But minimum wage, part time jobs, do not pay 2k a month Dublin rentals.
Campus accommodation is, actually, very difficult to access. Most likely you will get it for one year, if you're lucky.

I know it is a difficult compromise to share a small apartment, and, yes I do know about boyfriends, but the alternative is giving all of our lifetime savings to a smiling landlord.

Many students in Dublin are crammed into into 3 bed houses, with 2 or 3 to a bedroom and someone in the living room.
For people on averarage, or just above average wages, the cost of renting in Dublin, for a few years, is astronomical. Every budgeting tool is used.
The idyllic student life, strolling from rooms to campus to union bar, is long gone. Another of the great progressive advances of neoliberalism.
 
Allpartied said:
Can I ask how this scenario worked out for the poster. And put my own situation up for discussion.

I find myself in a similar position. I have four daughters, all close in age. Three will be in Dublin, from September 2022 and when one finishes in May 2023, another one will be starting. So, assuming the youngest goes to Dublin too, it looks like it would be a no brainer for me to buy a small property.
Renting for the next three years, for three children. Then renting two years for two and one year for one. So five years of renting in Dublin.
The cheapest rental, onsite accomodation, is 7k per year, so that is 21k per year, for three years. The cheapest rental apartments in North Dublin are 2k per month, with most demanding a 12 month contract.
I could buy a nice 1 bed apartment, with big sitting room, for 190k. This would, easily, accomodate three sisters.

With a 60k deposit that would leave 130k mortgage.

A couple of problems.

I am 56.
My salary is 80k, gross. There is capacity for contract work, if needed, which can get another 10-15k.
I have a small mortgage ( 50k) left on my PPR, paying 410 per month.
It will only work if I can get an interest only mortgage.
By putting a 60k deposit down, I would deplete my savings. I would have about 25k left.

Are interest only mortgages available for this type of scenario, or would I have to classify the mortgage as Buy to Let?


As far as I can see, if I am paying interest only on 130k, that would be about 6k per year, as opposed to 21-25k per year.
Over three years, that is a saving of, at least, 15k per year. 45k over the three years and 8k for the fourth year and 1k for the final year.

So, buy the property, use if for five years and then sell. If I get back what I paid, I'm still quids in.
I retain my 60k deposit, which I would have spent on rent over the years.

The only risk is a catastrophic property collapse ( 30% or more) .



Am I right, or have I missed something?
Click to expand...
You are taking on €130,000 of debt to fund this idea. That is the risk.
 
Steven Barrett said:
You are taking on €130,000 of debt to fund this idea. That is the risk.
Click to expand...

Agreed, but the asset remains. I mean its not going to zero and with a 30% deposit, there is a reasonable cushion, for property crash.
Even if the property crashes and I can only sell it for 130k, in five years, time, I'm no worse off.
There is always possibility of a deflationary depression, but it looks a long way off. In fact, inflation looks the bigger threat, at the moment.
Either way, I'm taking a risk. I could save my 60k, or give it to a landlord, or lose the 60k it in a property crash, or lose even more in a property crash.
 
_OkGo_ said:
Any mortgage that is not your PPR will be at BTL rates and yes there are options to get it as interest only particularly from the non bank lenders
Click to expand...
Bank of Ireland seem to be unable to provide interest only options. When you say " non bank lenders" , is that building societies, or other institutions?
 
The likes of ICS and finance Ireland. I'm pretty sure ICS will do interest only.

Not that I am recommending it but if it is the route you want to go, then you should probably talk to a broker that deals with all (or most) mortgage providers.

Allpartied said:
To be fair, they are all working and earning during the summer/weekends. They pay for everything themselves, clothes, food, nightlife, travel and books. But minimum wage, part time jobs, do not pay 2k a month Dublin rentals.
Campus accommodation is, actually, very difficult to access. Most likely you will get it for one year, if you're lucky.
Click to expand...
That is the unfortunate reality for students today and you as a parent trying to fund the difference.

Cavanbhoy said:
Another option to consider if you have 3 children going to college at the same time that if your income is under 60k you dont have to pay the student contributions, if its under 55k they will each get 1.6k of a grant as well.
Click to expand...
I would second this as well. Make sure you are eligible for every grant and support possible. Speaking to school guidance counselors or paying for advice from someone like an experienced accountant familiar with the grant process could save you thousands
 
Cavanbhoy said:
Another option to consider if you have 3 children going to college at the same time that if your income is under 60k you dont have to pay the student contributions, if its under 55k they will each get 1.6k of a grant as well.
You could put 1/3 of pay into pension to reduce income and if paying 40% rate of tax it will cost 15k but you will save close to that on fees plus grant.
While increasing pension pot by 27k yearly.
Click to expand...
It's not possible to reduce one's reckonable income for SUSI grant purposes by paying into a pension.
 
_OkGo_ said:
I would second this as well. Make sure you are eligible for every grant and support possible. Speaking to school guidance counselors or paying for advice from someone like an experienced accountant familiar with the grant process could save you thousands
Click to expand...
As an accountant myself, I would seriously question the wisdom in almost all cases of significantly cutting ones income (in this case by €20-25K) to avail of a grant package worth a fraction of that sum.
 
T McGibney said:
As an accountant myself, I would seriously question the wisdom in almost all cases of significantly cutting ones income (in this case by €20-25K) to avail of a grant package worth a fraction of that sum
Click to expand...
Agreed, I missed the OP's salary of €80k, I thought it was €60k from what I quoted. My point was more around the fact that if you are on the border of eligibility, you should be falling on the right side of it with some guidance.
 
_OkGo_ said:
Agreed, I missed the OP's salary of €80k, I thought it was €60k from what I quoted. My point was more around the fact that if you are on the border of eligibility, you should be falling on the right side of it with some guidance.
Click to expand...
Fair enough and that goes without saying but I would still be wary to tell someone 10-15 years off retirement to forego a promotion for example to keep themselves eligible for a student grant or any other similar short-term benefit.
 
The SUSI grant system does not favour a PAYE worker (eg. 2 parents on say €30,000 would be over the limit of the SUSI grant which is I think €54,000 max) not to mention the part-time work a student might do which is also taking into account.

I remember been at a school meeting some years ago about SUSI grants, I was walking out with a very wealthy tradesman who said “I must have a chat with my accountant to see what I can hide”

Unfortunately PAYE workers can’t hide there income
 
T McGibney said:
Fair enough and that goes without saying but I would still be wary to tell someone 10-15 years off retirement to forego a promotion for example to keep themselves eligible for a student grant or any other similar short-term benefit.
Click to expand...
I was just working of op figures and not suggesting he forgoes anything.
Gross salary of 80k if he contributes his full allowance to his pension it will safe him 10k in taxes. Plus he will save 14k on college expenses. Total of 24k.
So to make a 27k pension contribution in this scenario would cost him a total of 3k net.
It would be hard to beat that roi anywhere
 
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