Student Property Investment
In 2019 there were 1.8m undergraduate students enrolled at Universities and colleges across the UK. According to the Higher Education Statistics Agency this number is expected to rise to almost 2m in 2023.
With such growth in student numbers at a time when finance costs are at all-time lows there really is no better time to start building or expanding your student buy-to-let portfolio than now.
Why should you invest in the student property market?
In addition to the projected growth in student numbers, student buy-to-let property comes with its own unique advantages, as detailed below:
Benefit | Why? |
Strong cashflow and high rental yields | The majority of student buy-to-let properties are Houses of Multiple Occupancy (HMOs). These are properties rented to more than three different residents' who are not part of the same family but do share communal facilities such as bathrooms or the kitchen. These are more commonly known as house shares. There are approximately 177k HMOs nationwide, many of which are rented to groups of students. Rent is charged by the bedroom which generates multiple streams of income for one property. The higher cashflowing student property can provide investors with better returns on their capital than other traditional property investments. |
Higher capital growth potential | With student numbers expected to rise 10% by 2023, and space for new development being limited in and around University campuses, it is expected the rental demand for high quality well positioned student HMO stock across major university towns is likely to increase. The relative strength and security of the asset to yield/cashflow position provides an investor with the security of being able to easily dispose of the property should the need arise. Growth in capital values will also provide an investor with more opportunity to release equity through refinancing. |
Better security of income | Unlike other property investments, its common practice for student landlords to request each tenant provides a guarantor who will pay the rent (and any damages) in the event the tenant doesn't. This is usually a parent. The additional security of being able to hold guarantors' liable for rent is a positive incentive for maintaining low rent arrears. Secondly, the majority of students receive a student loan which may go towards paying rent. This means that unlike professional HMOs or BTLs, the landlord of a student property is more likely to receive the rent whether or not the tenant loses their job or experiences a change in their financial circumstances. Another benefit of shared student houses is the tenure. When renting to a group of friends there is one tenancy agreement which holds everyone jointly and severally liable. This means if one tenant doesn't pay the rent (nor does their guarantor), the landlord can seek recourse from the other joint tenants. This can be effective for maintaining low rent arrears. |
Lower void periods | Strong demand for properties in university towns combined with a letting period of around 1 year, means that landlords don't have to stress about finding new occupants. As most student tenancies are for 51 weeks of the year, there is little/no void period between tenancies, unlike in other type of rented accommodation. |
Resiliance to economic cycles | While few industries are impervious to economic downturns, its safe to say the student rental market is better placed than most. Those tenants in full-time education are less likely to default on their rent when others may experience higher job insecurity. |
How we can help
During our time in the student rental sector we've developed a lettings service that has identified and delivered on the needs of student landlords.
By choosing to work with us you can expect:
- Help with identifying key property investment opportunities in line with your investment objectives/targets.
- The use of Asset Management strategies designed to optimise the cashflow and value of your portfolio by monitoring performance drivers such as gross:net reductions.
- High levels of communication to keep you updated with the latest regulatory and market changes affecting the student sector.
- Guidance on achievable rents based on location and condition.
- Thorough tenancy referencing to minimise risk of tenant rent defaults.
- A complete hands-off passive investment service.
- Guaranteed rent options for those landlords/investors seeking a longer-term secure commitment.
For more about the services we offer please visit here.
If you'd like to chat with one of our property experts, please contact our friendly and knowledgeable team on 0113 278 1188. Alternatively, click here to complete a short form and we will be in touch to discuss your needs shortly.
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