Buy to let student accommodation
By the year 2010, the government is looking to educate at least half of the 18-30 year olds in higher education. As student populations in the universities continue to increase, there are forecasts of shortages in housing facilities for students as the universities have not constructed sufficient new accommodation to meet these growing student numbers.
These appears to be good opportunities to invest in buy-to-let student properties. Some financial institutions that specialise in arranging for loans to buy-to-let properties say that one in every six customers for mortgages are investors in buy-to-let student properties, and that of the estimated 2·5 million students attending higher education as many as two-fifths stay in privately-owned let property.
The student accommodation market is known for stability because students tend to stay for at least the whole academic year at a time.
Investors in buy to let properties for students will have to consider several key aspects of the investment.
Location, location, location
As with any other business, the location of your property is the key to success. You will want property located in areas where there are dense student populations. There are towns and cities where new universities and colleges are being established or are expanding. After you identify which ones you would prefer to be in, you must pinpoint the particular neighbourhoods where the social nightlife is livelier, and yet have easy access to the colleges, since these are sought after by students.
Your choice of the area where you purchase the property can spell the difference between a property that rarely has void periods and a property that can get student tenants only if you offer discounts. You can spend a lot of time looking for good areas, or you can contact the student accommodation officers, who may be able to assist you.
Income potential
The major advantage in having student tenants is that you can squeeze more of them into a property. Students actually prefer to have many companions sharing the house. If there are more of them in a larger dwelling, they figure they can reduce their individual running costs. You can even convert the living room into a bedroom and have more tenants. This could increase rental yields for you, though your property must meet stringent multiple occupancy legislation.
If your property is to be placed on the recommended student accommodation lists, then it will have to be inspected by the student accommodation officers to ensure that it also meets their standards.
Houses, not flats
A shared house gives a greater sense of community than a flat. A house may later give you a marketing advantage, particularly if universities decide to become more active in providing housing to their students. Houses with several rooms are attractive to students since they can rent these places with their friends and share the bills.
But if you are seeking to purchase a bigger property, say a three-storey property (or two storeys plus an occupied basement), make sure to comply with required licences. Property rented to five 'unrelated' tenants must have a Homes of Multiple Occupancy (HMO) licence valid for five years, issued by the local housing authority. There are requirements to be met on the physical facilities, such as fire doors, before the licence will be issued.
Generally speaking, the buy-to-let property you want should be near the university but even nearer to where students socialise. A lower quality property may be better since students cannot afford spending too much for rent. Whilst it will be necessary to have the basic amenities well-maintained in the house, students do not need special extras – which may keep your maintenance expenses controllable.
It may be wise to obtain a parent guarantor not only for the rent but also for potential damage to property. Experienced landlords will want students to sign a 12-month tenancy agreement to help minimise the void periods during the long student holidays.
Some parents purchase a house for their son or daughter at university or college and then rent out spare rooms to other students who, in effect pay all the costs of the student property, yet provide the parents with an appreciating asset, and their child with free, or cheap accommodation.
In summary, therefore, renting to students can be an attractive proposition, though you have to consider the costs of converting your property to multiple occupancy status. As you can be reasonably assured of the rental income from students, most landlords figure that a rental yield of 6 percent is not unrealistic to expect. That's not too bad, considering the tough times currently prevailing in the buy to let market.
