Risks and Rewards: Renting to Students?

On the day of A-Level results, the day when a school kid becomes a legal student. This opens out a whole new influx on potential tenants as they make the transition from “living with parents” to “renting.”

There has been a rise in Student Lets; the latest “accommodationforstudents.com” research shows increase of 4.3% on last year.

The average weekly student rent now stands at £65.30, 4.3% higher than last year (£62.61). The previous two years’ increases were just 1.6% and 1.7%. Since 2004, when the average rent was £52.44, rents have risen 25%.

Rents are highest in the South East, which hosts 8 out of the 10 most expensive student locations. London leads the way with an average rent of over £100 per week, with Guildford, Uxbridge, Cambridge, Middlesex, Egham and Brighton all weighing in with rents of over £80 per week. The stats are based on nearly 60,000 properties in 83 cities across the UK.

Some traditional English redbrick universities: Liverpool (£55.49), Birmingham (£57.30), Manchester (£60.12), and Sheffield (£60.14) are still below the average UK weekly student rent of £65.30.

Best value locations in terms of student rental accommodation are Middlesbrough, Stoke-on-Trent and Stockton with average weekly rents of £41.47, £42.65 and £44.71 respectively.

So as a Landlord, the most promising locations are in the South East, in particular London, with its wide choice of universities and colleges. Also London attracts many foreign students, they our paying huge international rates for tuition fee so it’s a safe assumption to say they are willing to pay higher prices and come from well off backgrounds.

Example

One of our clients has a 3 bedroom flat it SE1, which has now been converted into a 4 bed. We have been able to achieve £599 per room per month, leaving the client with over £800 per month cash surplus after paying the buy-to-let mortgage.

We source the tenants from post graduate universities and colleges, what we have found is that many students like to pay 3 months in advance due to budgeting reasons and they pay it like they do their tuition on a term to term basis. This further aid the Landlord’s cash flow. What other private let in our economy is in a position to pay 3 month advances on rent.

There are of course risks involved like any other AST (Assured Short hold tenancy). Primarily rent payment, but if your contracts take references, take on parental guarantees and if possible insurance, your risk is dramatically reduced. In our case study, we have never had any students default on payments.

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Landlord’s bewared; specify who is responsible for council tax, TV license and bills. Council tax is another source of advantage, Students are exempt. As a Landlord make sure the council is informed of the occupants of your property and advise the students on the simple procedure.

Provide your property with broadband, its only around £100 a year and that dramatically increases the rentablity of your property for students.

Older students are always more reliable, however there are many freshman available, those who have to go through Clearing, have little or no chance to get University Halls and have to look in the private market.

Don’t worry if there is not immediate responses from adverts, as it gets closer to the start of courses the interest grow exponentially, and desperation grows and properties are taken of the market.

Renting to students is cheap and cheerful, provide good quality basics, desks, chairs, a lamp and majority are happy and you won’t find any complains, they are always too busy partying or working to care for minor niggles.

Overall the returns out weigh the risks, managed well and reducing the risks, can create huge cash flow surpluses.

Email me for more info on our service info@propvestment.com

Sources include personal experience, Landlordzone.co.uk and accomodationforstudents.com

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