Student lets: do your homework for A+ returns

While student house shares have provided small screen, comedic fodder for many years – The Young Ones and Fresh Meat come to mind – they haven’t always been the favoured buy-to-let among landlords.

Thoughts of wild parties, food festering in fridges for months and bedrooms painted black have generally put investors off, especially as the possibility of these occurrences add to the increased wear and tear found in house shares.

Now, however, with an investment’s yield more important than ever, student lets are stepping into the spotlight. The refreshed proposition gets off to a good start. Student let yields have recently outperformed those in the overall rental market. Since 2016, landlords of student properties have enjoyed mean gross yields in England of 6.15 to 6.6%, says Paragon Bank, with the overall rental market yield lagging behind at 5.43 to 5.6%.

In addition, data from Statista suggests students actively opt for private landlords, with 569,000 students in rented accommodation during the 2019/2020 academic year, compared to just 175,000 in private-sector halls. This level of demand is thought to be behind a 20% hike in rents over the last year, as discovered in the Royal Bank of Scotland’s Student Living Index 2021.

Rising rents are good for yields, especially when landlords buy in cheaper areas that can tolerate good rents. To establish where those locations are, Goodlord analysed the activity of 5,000 student tenancies between January and July 2021. The company found the most impressive yield gains were in the North East, the North West and the South East.

Drilling down into data further, Paragon Bank found it was single university cities that returned the most attractive yields. Swansea was the best performer, with landlords enjoying student yields of +9.56%, followed by Hull (+8.68%) and Sheffield (+7.58%). Other cities that made its top 10 for student yields included Chester, Stoke-on-Trent, Lincoln and Preston, with only Liverpool, Coventry and Leeds having more than one university.

Both the Knight Frank/UCAS 2018/2019 Student Accommodation Survey and Save the Student’s National Student Accommodation Survey 2021 feature some fantastic data for property investors considering the student let market.

Highlights include:

– Renting from a private landlord was a student’s preferred accommodation option

– August and November are the most popular months to search for next academic year’s let

– The average UK student rent is £148 per week, when renting from a private landlord

– The rent includes at least one type of utility bill for 75% of students

– A lack of heating and hot water is a student tenant’s biggest property problem

– 70% of students were willing to pay a premium rent for fast WiFi

– International students are most concerned with the quality of a rental property

Student let pro and cons

Your decision-making process needs to weigh up the perks and possible pitfalls of student lets.

Consider the following when coming to your conclusion:

Pros

1. There are market-topping yields for landlords who balance their property’s location with the purchase price and rents

2. There’s a new stream of potential tenants every year

3. Rents are generally reliable, with parental guarantors and 6 months upfront not uncommon

4. Many student tenants remain in the rental sector after graduating – good for cross-selling other properties in a landlord’s portfolio

5. Ability to market a property up to a year in advance for an early sign up

6. Students respond to low-cost advertising through social media, sharing sites and university accommodation departments

Cons

1. Landlords will need to budget for increased wear and tear due to multiple occupants

2. Conversion and renovation work may be needed when setting up student accommodation

3. Expected to be contacted by students about anti-social and behavioural issues

4. A house share/HMO (House in Multiple Occupation) may need a licence from the local authority to operate legally

5. Expect an increased level of gas/electric/fire safety compliance when running a student house share

6. Tenants may ask for a rent reduction if they’re vacating between academic years

Additional considerations

– Consider offering a student let fully furnished

– House share marketing may involve multiple viewings by multiple people

– Many students expect ‘bills included’ rental packages

– More frequent property inspections may be required

– Consider a student let’s location: within walking distance of a campus, shops and bars

– Students will often prioritise a property with en-suite bathroom facilities

If you want to say yes to student yields but realise you need help with viewings, check in and property inspections, partner with Viewber and we can be at your property when you can’t.