According to research by Paragon Mortgages – a buy-to-let mortgage specialist – landlords letting to students are very positive about the demand for their properties, with just over three-quarters of the landlords questioned viewing demand as either good or excellent. This finding is reinforced by a poll completed by National Landlord Association members, which found 70% of respondents reporting that future returns on their investment in student property look good. The feeling of optimism amongst landlords letting to students is positive, particularly with the decline in student numbers for the coming academic year due to the rise in tuition fees. However, this sector of private rental should continue to do well, as long as the popularity of studying at university continues.
Student buy-to-let – an attractive investment
Renting to students, which is one of the largest specialist sectors in private rental, is attractive to landlords who have calculated letting profits from students. Letting individual rooms to each tenant tends to mean that rental yields are higher than renting a whole house to say a family; typically net returns on student buy-to-let properties is 6.5%, which is significantly better than the buy-to-let market as a whole. Not only this, but generally landlords have a good experience of letting to students. Contrary to stereotypes, students behave well and are actually as a general rule very punctual when it comes to paying their rent, with a recent study showing that 71% of students were rated as either good or excellent in making prompt rental payments. Landlords also usually know several months in advance that they have tenants for the next academic year, as the intense competition for student accommodation means students tend to need to arrange accommodation early in the spring term.
Benefits of the increase in international students
The number of international students is increasing – there are currently 428,000 international students studying in the UK and this is expected to rise by a further 30,000 once 2020 is here – which is more than likely to have a positive impact on investment in private rental. The rise in student numbers will obviously increase the need for more student housing, but additionally international students are used to paying more while a student here, so are prepared to pay higher rents. International students tend to favour high quality student properties, so this offers a good investment opportunity for landlords, particularly as there is at present a shortage of this type of property dedicated to students.
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Where to buy
With more than a quarter of a million students in the capital, London is the top place to buy property for student buy-to-let where income doesn’t necessarily have to be verified. While property prices are higher in London, so too are the rents that you can expect to receive – a student flat in the capital on average provided £278 per week in rent in 2011. Brighton, Edinburgh, Durham and Manchester are all hot spots for investment in student accommodation. Edinburgh is attractive to Scottish and EU students, as they do not have to pay tuition fees at Scottish universities, and Durham struggles to meet demand for student accommodation owing to its small size; both make great places for investment.
What to look for in potential student properties
Location is all important – ideally the property should be within walking distance of the university, but being close to transport links is still important to allow students to visit friends, be able to get home when needed or if they feel like getting away for a weekend. A small house in need of updating is ideal, as you will be able to add value to the property through the modernisation that you will carry out; flats tend to be more expensive for the space you get, but can provide higher rental income per room. If the house has two or more reception rooms, remember these extra rooms are an opportunity to generate more money by converting them into bedrooms.