New BTL- should I convert to two or three bedrooms?

[jai]

Hey guys ive got a bit of a dilemma..

Ive just bought my first BTL property and am caught in 2 minds...

The house is a 3 bed terrace converted into a large 2 bed and the family who were living there redecorated it to a VERY high standard; new kitchen, bathroom etc...

The main reason that I bought it was because i got it below market value and it is opposite nottingham university (i'm talking across the road - you cant get a better location for students)

My dilemma is -

Do i convert it back into a 3 bed and rent it to students (post grad's preferably)
giving me a rental income of approx £720 a month?

Or do i leave it as a 2 bed and rent it to a professional couple or family (the surrounding houses are all families even though it is a student area) Hopefully these tennants being less hassle than students but the rental income would be £540???

Bare in mind it would cost £1000 to convert it back to a 3 bed..

P.S i'm a student myself and wont have a problem finding student tennants as i know my own market!

Thanks in advance:)

[Ericthelobster]

I'm guessing that the £1000 doesn't include the cost of bringing the property up to HMO standard, which it will need if you intend to let out to individual students.

I'm further guessing that the extra costs which you will need to factor in will make up your mind for you?!?

[davidjohnbutton]

Consider also the fee which Nottingham City council will charge for it being a licensable HMO - some local authorities get away with £1100 or more!!!!!!

[jai]

doesnt the new hmo regs only cover 3 story houses or more??

I need to get up to date with the new regs...

[MrShed]

To my mind, it would be students without a doubt. But it depends on your individual circumstances, you *may* have to be a bit more hands on with students. And also factor in the other costs as mentioned above. One thing not mentioned is that you are potentially more likely to have a void period with student lets, as they nearly always leave every year. However, if your student let market is anything like up here(Newcastle), as long as you keep the decor up to scratch, the students will snap your hand off each year.

[jai]

Just spoke to Nottingham council - they're charging £300-£500 for a 5 year HMO license..

As the house is less than 3 story i dont come under the strict fire regulations, they said that as long as there is an escape route i.e large windows in the bedroom then i should be ok..

So its not gonna cost more than £700 to get it up to scratch..

Mr Shed, In nottingham most students sign 11 month contracts with half rent during the summer so void periods is left to a minimum, also, its in very good condition as i mentioned that is why i was a bit hesitant to let to students as they are notoriously messy!

Leaning towards the students but any more advice would be very greatly appreciated!:)

[LMT]

Presuming you take a deposit of one and a half month's rent at the beginning of the contract you will have a higher sum to hold against damages from the students. Also with students you can insist on a guarantor for the rent - unlikely with the family option. Your 10% wear and tear claim against tax will also be higher each year with the higher annual rental income from students. Both of these factors should combine to make the student option more attractive and give you a bit more cover if things go wrong. Your ideal mix is probably non-smoking female post-grads - though I'm sure people will beat me up for saying that.

[Ericthelobster]

One other thought which you've probably already considered: if you let to students you really have no option but to go fully-furnished - if it's a family you can decide fully, part or unfurnished.

Not saying one's better than the other, just another factor to think about.

[jai]

yea ive factored in the cost of furnishing it, i havent got a problem with that..

cheers;)