Parents can buy a home for their studying child. Because finding accommodation in a student town is a disaster for first-year students every year. Buying a home yourself or having your parents buy it is sometimes a much better option. But a private home for a student that is purchased by the parents does fall under certain rules.
Parents who help their child buy a student house
Parents who help their child purchase a student house can take different paths. These are:
- Buy a house and rent it to the child
- Putting student accommodation in the child’s name with the parents acting as guarantors
- Lending money to the student child to buy a student house
Parents buy a house for their student child
For example, parents can buy a home with the equity in their own home and rent it out to their own offspring. The advantage is that the parents and their child decide who can live in the home. The residents are also not exploited, because the parent and child have the say. The parents can then pay the mortgage from the rental income. In addition, the rental income from a second home is tax-free. In addition, they can benefit from a possible higher sale of the student house. A good increase in value is usually achieved within a period of between 5 and 10 years.
Taking care when buying a house for studying children
There are some things that a parent who buys a home for a studying child must pay attention to. For example, selling the house with the tenants still in it is not wise. Then the house yields less. This also has to do with the fact that tenants in the Netherlands are very well protected. They cannot simply be put out on the street. Anyone who wants to reduce the value of their home must also ensure that the house is not completely dilapidated. Good rules for maintenance and cleaning are crucial.
Student housing in the child’s name
Parents can also register a student home in the child’s name. In that case, they co-sign for the debt and act as guarantor. A mortgage provider (if necessary) always imposes the condition for these conditions that there is sufficient equity in the parents’ home. The child must pay the mortgage himself. The mortgage costs are fully or partially reimbursed from the rental income of fellow residents. The advantage of this method is that the mortgage interest can be deducted. However, tax must be paid on rental income above 4,625 euros (the rate for 2010). To see which construction is the best, it is important to list everything carefully. It must be taken into account that in this case the child is also directly the landlord, but the parents do act as guarantors. The parents are therefore held liable if a child does not meet his financial obligations.
Parents lend money to their student child to buy a house
Parents can also lend money to their studying children so that they can then buy a student house. They can then use their savings or part of the equity in their home for this purpose. The child then buys the house and pays the interest to the parents. This interest can possibly be donated back in part by the parents tax-free. In 2010, parents are allowed to donate 5,000 euros tax-free per child.
Pay attention to whether a home can function as a student house
Whether a parent borrows money, buys a home or registers a home in their child’s name, it must first be determined whether a house can be rented out as a student house at all. A permit is often required for this. Each city also has different rules for this. The municipality is the appropriate authority to obtain information about this.
Renting out a home is more than just collecting money
Moreover, renting out a home is more than just collecting money. The owners of such a home must ensure that no nuisance arises in the neighborhood, must ensure the technical condition of the home, its maintenance and the contracts and contacts with the residents. If parents live far away, it is quite inconvenient if the roof leaks or the toilet becomes clogged. Outsourcing the management and rental of such a home may be an option in that case.
Special on mortgages and home ownership in relation to taxes
Much more information about mortgages and tax regulations relating to home ownership can be found in the special ‘Mortgage and tax’.
Starting college is an exciting time for many young people. You have to choose where you will study, where you will live and whether you will study in the Netherlands or abroad. Sometimes young people have no experience with studying at all, because there is no studying in their family. A child with autism can experience many more problems, especially because it is out of place in a student house where life is loose and where there is no clarity. Young people sometimes cannot find accommodation at all when they study, and then owning their own home can provide a solution. Or those kinds of things the special will study.