Student accommodation is increasingly seen as a profitable area for property investors. There are various ways to make money from student accommodation from buy-to-let and renting to local students, to investing in purpose-built blocks and special types of REITs.
This article is looking at buying property and renting it out. There’s another one to come that explains how to invest in student accommodation without actually buying property.
We have explored the various options and here is our guide to the different ways you can do it.
- Buy-to-let for students
- Where to look
- What property to buy for student lets
- Funding your student buy-to-let
- Do the checks
- Holiday season
- Finding the tenants
- Pros and cons of letting to students
The two most important things to remember if you chose to buy-to-let to students are:
- the location
- demand for your property.
Obviously, it’s important to buy in a town where there are a lot of students and a constant supply of them!
Even if there are a number of colleges in the area, it’s worthwhile checking with local lettings agencies – and even the colleges themselves – if the majority of their students live outside of campus or if they have accommodation provided.
Usually the first-years are given student digs in colleges but the second and third-years have to fend for themselves. This is what you want to hear in your area. See our article about buying a property to make money here.
Location is the most important factor to consider when looking to buy a property for student let.
- Properties located close to the university campus or student union are generally most desirable.
- First year students typically live in halls of residence so you will be catering to second and third-year students. They tend to want their home to be a few streets away from campus. The closer the property is to college the better, as students often don’t have the finances for a car.
A matter of a few streets can make a big difference between having full occupancy every year or not. So even though a five minute bus ride might leave you at the door of a property £50,000 cheaper, it’s not necessarily worth the saving if there are no student tenants.
However, while it is typically best to buy properties as close to the university as possible, the best places to buy will greatly depend on your particular location and the dynamic of the city.
- If based in a university town, it’s likely that one area is known to be ‘the student part of town’ so buying there would be a wise decision.
- Alternatively, if you are buying in a big city, certain central areas might appeal to university students more than others. Do some research to find out which locations are most appealing to your future tenants.
When looking for the right property the first question to ask yourself is ‘what are students looking for’?
Gone are the days when students will settle for a grotty alcove of mould and dirt simply because it’s an affordable place to live and, implicitly, ‘they’re students’. When catering to prospective student tenants, it’s important to know what they’re looking for. Here are some tips of what to look out for when purchasing a house to student let.
Prime Location: As mentioned above, location is a key factor to consider when buying a student property. Look for properties as close to the university as possible. Students don’t mind living on a noisy street or looking over a convenience shop so you don’t need to worry about those details, but ease of getting to class is a major consideration.
Easy-To-Maintain Properties: When looking to buy the property itself, bear in mind that students don’t generally want a garden to nurture and maintain. So go for flats and houses that don’t have a garden or period features that you need to look after regularly. However, if you find an ideal property that has a small garden, turn it into a patio and that will make it much easier for everyone. Add a BBQ and it could be even more attractive to students.
Optimising Potential Bedrooms: Students aren’t typically in need of living rooms or play areas so be sure to maximise the rooms you have. In a family home you can turn what would have been the living room into a bedroom.
- Make sure that you equip the individual bedrooms with the necessary fittings – a bed, a wardrobe and a desk if there’s room.
- If you are looking at older style properties, keep a look out for ones with two reception rooms – a living room and a dining room – as the living room can be converted into another bedroom thus maximising the tenant capacity of your property.
- Make sure there are enough bathrooms and toilets. It’s particularly important to have a second toilet where there are at least three people living in the building.
If you intend on financing your purchase – in other words, getting a buy-to-let mortgage – be aware that not all banks are willing to provide a loan for student accommodation so make sure you have enough for the deposit and a bank to back your investment.
Get in touch with our mortgage partners, L&C Mortgages. They are brokers and will be able to put you in touch with lenders that are happy to finance these sort of investments.
There are two main types of insurance that you should have as a landlord:
Building insurance: Building insurance covers the structure of your property from doors to floor, windows and ceilings. If you have a mortgage on the property, it is likely that the bank will require you to have building insurance.
For more information on home insurance click here.
Contents Insurance: This is to insure pieces of furniture or other interiors that have been damaged as a result of the tenancy. Depending on the quality of the furniture, this is not always necessary. This is not the same as Student Possessions Insurance which covers the tenants goods. This is something that the students themselves should consider taking out.
Optional insurance policies you might like to take out if it would give you peace of mind are:
- Loss of rent insurance provides you with a safety net in case one of your tenants does not pay rent.
- Unoccupancy insurance might also be necessary if the property is vacated for a long period of time. Most insurers cover an unoccupancy period of ninety days between tenancy changes.
[calculator-one align=”right”]Remember that if there is any gas in the property you need to have an annual gas check by a qualified plumber who needs to give you a certificate to prove that the gas appliances are safe and won’t poison tenants with carbon monoxide.
Also, check with your local landlord laws to make sure you are complying with all the regulatory checks and to ensure that your tenancy agreements are up to date.
Summer holidays can pose a problem for landlords letting for students as it is common for students to leave for the summer and to move house every year. With this in mind, there are three solutions to ensure you’re still making money during the summer.
By offering the property for the 52 weeks, you can be sure to receive monthly rent payment regardless of whether or not they are using the property. Although this seems appealing, know that some students will not pay for a full year if they do not intend on being there to use the property.
2. 42 Weeks & Half Rent
As most students will go back home for their summer holiday, charging half the rent during the summers months may be an arrangement that suits both you and the them well. Assuming they vacate the property, you can use this time to renovate the property and do any work that needs to be done before the next tenants move in. It serves them well because it provides them with somewhere to store their goods during the summer.
3. Student Summer Letting
Providing the tenants with a contract that begins and ends with the academic year (typically around 41 weeks) enables you to let your property to students that come to study in the summer. Be sure to look into the summer programmes in the areas around you to make sure there will will be enough of a demand. Also speak to the programme coordinators to see how most students go about finding short let accommodation.
As with all investments, there are good and bad elements. Ying Tan, the Managing Director of The Buy to Let Business, says the main positive and negative aspects of investing in student accommodation are:
- So long as students continue going to university, there will be a demand for student accommodation
- It’s no longer about run down digs – students expect good accommodation
- They offer higher rental return on the price of the property
- You can charge more when letting four individual rooms than you can for a family home with four bedrooms
- Often the first thing students pay for with their loan is rent
- There are parent guarantors in case rent or other bills are not paid
- Investing in student accommodation is more secure than is made out in the wider market
- Getting financing can be tricky
- The choice of lenders is still limited
- Interest rates on the loans can be high (although rental return are higher so the overall profit is far better)
- It’s unlikely that you will have long lets as most students move houses at the end of each year
- You will have higher maintenance costs as students are unlikely to look after the property in the same way a family might