Six things to consider before buying a student property
Rental yields can be higher than average
Landlords of student accommodation tend to earn higher rental yields because they can charge per room. If you buy in the right university town, demand should be strong with a steady flow of tenants and a good income.
Turnover will be high…but void periods – when the property is left unoccupied – should be low.
Most students only rent a property for one year so you may find yourself needing to find new tenants on a more frequent basis than regular landlords. However, if you buy in the right place, you shouldn’t find filling your property too difficult.
Location is everything
It’s easy to assume that buying a property in any big university town or city will bring in the cash. But property prices and rental yields vary across the country.
Online estate agent StudentTenant.com found that out of the top 10 ranking universities in the UK, Durham was the cheapest place for landlords to cash in on student accommodation. The average price of a four-bedroom property in the city is £151,465 and landlords can expect rental yields of 5.22%.
Warwick, where the average four bed property costs £338,220, is the second when it comes to rental yields. Landlords can expect to earn 5.11%.
At the other end of the spectrum, landlords in Oxford, where the average four-bed house costs £497,603, will typically earn 4.12%.
London landlords can expect to make closer to 3%.
Students have a bad reputation
Rightly or wrongly, students have the reputation of being unreliable tenants who don’t always treat properties well. Think posters stuck on walls and all-night house parties. But David Hollingworth of broker L&C Mortgages says this can be “something of a stereotype”.
“Many now demand a higher standard of accommodation, which in turn could command a higher rental income,” he says.
You need to do your research
Most students want to live near campus or close to student bars, pubs and restaurants so getting to know the area is essential. Ray Boulger of mortgage broker John Charcol suggests checking with the local letting agents and the university to see whether there is an abundance of choice or a shortage, or somewhere in between.
“It may be worth letting the property through the university rather than a letting agent,” Boulger suggests.
You may have fewer mortgage options
Many student properties are subject to House in Multiple Occupation (HMO) or local licensing requirements. These can incur additional local authority fees. They can also impact your mortgage choice.
“Not all buy-to-let lenders will consider this type of property,” says Hollingworth.
“Some lenders will want to be sure the property hasn’t been adapted and has separate locks on doors for example. Some will assess the likely rent as a single family let which could be lower than the student market would stand and could affect the borrowing amount as a result.”