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Earn as you learn: How buying your own student digs can work out cheaper than renting

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The usual fanfare is greeting students beginning university life. That means two-for-one shots, groans about soaring fees and swapping stories about irresponsible landlords.

Some are also having a rude introduction to the university of life. At the University of Lincoln, dozens of students will be sleeping in portable cabins after the university was caught short of proper accommodation.

‘It is not what they signed up for,’ as a student union rep put it.

It is unclear how long  Lincoln students will have to be in their less-than-luxury £30-a-week digs, but their experience will concentrate the mind.

They might want to take steps to ensure that it never happens again.

Megan Walsh, who is beginning her third year of Veterinary Science at the University of Nottingham, could be an inspiration.

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When her lease came up for renewal half way through her second year, Megan and her parents, Jo and Michael, calculated that she would be paying about £35,000 over the remainder of her six-year course, at £450 a month, in a one-bedroom flat in the noisy town centre, with no garden.

They decided to seek an alternative.

After running into problems finding mortgage companies which would take their business (because Megan was a student, and her parents are both in their early 60s), the Walshes found a deal with Bath Building Society under its Buy for Uni scheme, and last May, bought a three-bedroom terraced house in the suburb of Clifton for £97,000, with a loan comprising a 20 per cent deposit and an 80 per cent mortgage.

The loan is in Megan’s name, but Jo and Michael are guarantors.

Under the terms of the mortgage, she has to let one of the rooms out to a friend, which pays for the loan and mortgage interest. It means Megan is now living rent free.

‘It works brilliantly,’ says Jo. When Megan finishes, she will sell the house on. ‘I don’t think it will make much money, but at that price, it’s not going to lose £35,000,’ says Jo.

‘With fees rising, families need to make sure that the investment in education counts for something at the end of the course — shelling out significant sums of 'dead' money for rent is less appealing than ever,’ says Dick Jenkins, chief executive of the Bath Building Society.

The question of whether property will appreciate in the current market is hotly debated.

Figures released by Lloyds Bank and the Halifax showed that over the ten years from 2001 to 2011, house prices in new university towns increased by 70 per cent on average, compared to 62 per cent across Britain as a whole.

It seems enticing until you realise that much of that increase was up to 2007, and that capital appreciation in the likes of Lincoln — at 95 per cent up to 2011 — and Loughborough — at 90 per cent — will be a lot harder to come by.

According to Lucian Cook, director of residential research at Savills, you should not expect great capital growth. ‘There are greater forces at work than the student population: the north/south divide and the lack of first-time buyers, for instance,’ he said.

But as a way to offset university costs and as a long-term investment, you could reap the benefits.

‘Many lenders have made things difficult for first-time buyers by demanding high levels of deposits and that has helped fuel an inflated need for rental property and higher rents,’ according to Dick Jenkins.

Back in Lincoln, James Drabble, of Winkworth, says interest in the key student areas is high. A two-bedroom terrace will cost from £90,000 to £110,000.

‘A lot of investment buyers choose a three-bedroom house with separate living room, dining room and kitchen so you can create a fourth bedroom,’ he said. Those cost from about £120,000. Students typically pay £50 to £75 a week for a room, which is often cheaper than the university accommodation.

Mary Latham has been a student landlord for nearly 40 years and has a portfolio of properties in the Birmingham area.

She recommends potential landlords should sign up for an accreditation course with the National Landlords Association (NLA) which covers everything from the law to good practice.

‘You have to do your research,’ says Latham. ‘For every university town, there is the ‘golden halo that students like to live in. The first thing to do is contact the university accommodation office and student union to find out the good areas.

‘Students are becoming more and more selective about location and standards of accommodation.’

Especially if they begin the year living in a portable cabin.

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