Please Note: This Article is 6 years old. This increases the likelihood that some or all of it's content is now outdated.

As a current or prospective landlord or investor, letting to students is always a potential option for your portfolio.

Some people are instantly put off by the idea, perhaps remembering their own experiences of student accommodation. However, despite the numerous pitfalls, letting to students can be a rewarding experience in more ways than one.

One key fact that you should bear in mind is the size of the market. The number of students in the UK rose from around 1.8 million in 1997 to 2.5 million in 2007 and the numbers have continued to rise, with it estimated to be around 3 million in 2014.

The target of getting 50% of all young people into higher education has seen the demand for student properties skyrocket. This is combined with the increasing numbers of foreign students choosing the UK as a higher education destination, set to be around 21% by 2018. All of which suggests a healthy market exists.

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However, it’s not just the size and potential of the market that appeals to many landlords. Student accommodation – while certain standards are expected – does not have to be as state of the art, modern or expensive as it does for some other rental markets. This makes it ideal for older properties and those looking to rent for interim periods.

Yields are also relatively high in student properties, as most students don’t mind using living spaces (including dining rooms and lounges) as extra bedrooms, allowing you to maximise rental potential.

And it has to be said that student tenants are easier to find and locate than in other markets. The fact that student lets by their nature require shorter contracts mean you aren’t committed to renting to tenants in the long term.

Of course, you need to be aware that student property attracts lower capital appreciation than other types of property, and that when the time comes, maintenance bills can be quite high. Although, this will be balanced by savings on top end furniture, fixtures and fittings at the start of the lease period.

You also have to bear in mind the periods where students do not require the property, such as the summer months. This could result in empty properties during these periods. However, in some areas where demand for student accommodation is high, typically in London and surrounding towns, landlords can charge rent for 12 months of the year.
Specialist student accommodation and halls of residence also take up a significant part of the market share and can accommodate for these fallow periods.

Landlords / investors need to be aware that significant new investment is being made by institutional investors in some location which will inevitably affect the balance of supply and demand: thorough market research is vital before committing resources to any particular area.

What you need to do

Ideally, you should only accept student tenants that have been recommended or approved by their education institutions. This will at least provide you with some kind of guarantee and safety net, as there is a channel of consequence open with the university.

Unless your tenant can provide proof of income or banking receipts, you need to make sure that they have a guarantor to accept financial responsibility on their behalf. This is typically a parent but does not necessarily have to be.

It is also important to ensure you have included in the agreement that if one of the tenant leaves the premises, the remaining tenants are responsible for finding a replacement or making up the shortfall in the rent. Students leaving university or ‘dropping out’ is very common, so make sure you are covered in the event of this happening.

You should also ensure that your property has been subject to a detailed itinerary and visual survey before the tenants move in. Ideally, use a smart phone to make a video of the condition of the property and present this as part of the house pack or tenancy agreement when the lease period begins. This will help to make it clear to tenants that they are responsible for any damage caused to the property.

There are dedicated student letting agents who can do much of this hard work for you, but you must ascertain which agents are the best to use.

Ask for references and even speak to students themselves. Very often the worst agents are also similarly poor with the renters themselves. A bad reputation is a sure sign of a company to avoid.

If you do your homework, ask the right questions and are thorough, there’s no reason you can’t rent a property to students and enjoy a high yield on your investment.

Article Courtesy of What House? – http://www.whathouse.com/

Please Note: This Article is 6 years old. This increases the likelihood that some or all of it's content is now outdated.
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