Sending your child halfway around the world to study can be one of the hardest things a parent can do. Whilst you know it is in their best interests, the distance can make it hard to know if they are safe, comfortable and have somewhere good to live. One option that many parents choose to help alleviate their concerns is to purchase a property for their child to live in whilst they are studying in Australia. Not only does it ensure that their child has someone safe to live, but it can also make good investment sense as well.
So if you are looking at purchasing a property for your child in Australia, how do you go about it?
The property will need to be purchased in either your name or your child’s. The name on the title will also need to be linked to any mortgage on the property, so it is worthwhile ensuring you have worked out how the property will be financed and who will be the mortgagee before signing on the dotted line and ensuring that the correct name is on the title. If you haven’t worked that out before purchasing the property, you can always put a “nominee” on the property purchase so that you can change the details before settling the contract.
As a foreign investor you will need to obtain Foreign Investment Review Board (“FIRB”) Approval for a property purchase, unless you are purchasing a property that is exempt from FIRB approval (such as a new off the plan investment).
If you need to borrow money to purchase the property, there will be hurdles to go through to get financing in Australia. A student visa is a temporary one, and as most students either don’t have an income in Australia or one that is very large, it is unlikely that your child will be eligible for financing in their own name.
As a foreign investor, obtaining a mortgage in Australia may be a little challenging but is not impossible. The biggest issues are likely to be around proving you have capacity to pay the mortgage in Australia, having a source of income in Australia will help prove this. The Australian banks may look at your income overseas, but because they cannot access it in the case of a default it is unlikely to hold much weight when applying for a mortgage in Australia.
Another option is to obtain financing in your home country for an investment property in Australia. The requirements will differ depending upon the bank you are borrowing through, and may require you to prove rental income received from the property. In that case, it may be necessary to set up an arrangement whereby your child leases the property from you and pays you rental income. Your accountant and bank should be able to advise you on the issues around how to do this.
Finding a Property:
Now comes the fun part of finding a property. Around most universities and tertiary education institutions in Australia are property developments that have sprung up to meet the growing demand for student housing. Particularly around central business district areas you will find high rise property developments that offer a comfortable apartment for your child. Some of these may have obtained FIRB approval to sell to foreigners already, which will be one less thing you need to think about. The easiest way to see what is happening around your child’s place of study is to contact local real estate agents and also their educational institution. Both are likely to have information about local developments with appropriate student housing.
If you want to purchase a property a little further away from your child’s place of study, you can of course choose anywhere you wish, taking into account the requirements your property will need to meet for FIRB approval.
A few things to consider when choosing a good location include access to public transport and safety, particularly at night. Whilst Australia is generally a safe country to live in, some urban areas can be dangerous at night time, particularly on trains or around trains stations. So it is worthwhile speaking to some locals and finding out how easy it will be for your child to get home each evening.
Value for Money:
Determining whether you are getting value for money and a good investment in the property you purchase will be something that you will need to determine. Based on pure capital growth, you can speak to local real estate agents to understand how properties in the region you are looking at have fared recently and by seeing how much investment is going on in the local area.
If you are not receiving any rental income from your child for the property, then there will obviously be no income gains in the short term, but you can assess the opportunity for long-term rental once your child has completed their studies. The quality of the educational institution that the property is near, the number of students who attend and recent rental prices will all give you an indication of the potential to rent the property out in the future.
What cannot be valued is the peace of mind that you will have knowing that your child has somewhere comfortable and stable to live when they are far away from home.