The UK is home to 2.32 million university students, and many property investors are marketing their properties to this younger generation of renters. Students who don’t live on campus and don’t have family nearby need safe, affordable, and convenient housing that puts them close to their classes and close to restaurants, pubs, shops, and the local nightlife scene.
If you’re thinking about investing in a property near a university, consider these five tips to a successful student buy-to-let:
The Legalities
One of the most cost-effective ways for university students to live “on their own” is to share a home with roommates. They are looking for housing that gives them separate bedroom areas but allows them to share the common spaces. A building that houses three or more unrelated tenants is called a House in Multiple Occupation (HMO.) If the building is more than three stories tall or is home to more than five unrelated tenants, you have to apply for an HMO license. This license can cost between £500 and £600 depending on where you live and is valid for five years.
To learn more about an HMO license or apply for one, visit the gov.uk website.
Safety First
If you are marketing your buy to let property specifically to students, there are a handful of safety checks that must be completed before you are considered fire safety compliant. Some of these things include providing a fire escape, fire, and carbon monoxide detectors on every floor, and ensuring that all furnishings in the home are fire safety compliant. If you have more than five students in your property, you are legally required to provide a fire blanket and fire extinguisher.
Furniture and Finishes
Because most college students are on a budget, they will expect their rental property to be fully furnished. This means you are responsible for providing the cooker, refrigerator, freezer, kitchen appliances, and all living room furniture. Basic bedroom furniture such as beds, a chair and desk, wardrobe, dresser, and a lamp are also standard. You’re not obligated to provide luxuries like satellite TV or bedding and towels, although some landlords do choose to throw in some of these luxuries and use it to justify higher rent prices.
Common Student Buy-To-Let Problems
Because you’re dealing with tenants who have probably never lived on their own before, you may run into a few issues that you typically don’t see when renting to more established adults. One of the main problems is the rent collection. Since university students often don’t have a steady stream of income and some are still reliant on their parents, it is important to secure a guarantor for each tenant. This is someone you can go to if a student tenant is falling behind on their rent.
Another factor to consider when renting to students is that since this is the first time they’ve ever lived on their own, they may not have a lot of experience taking care of a property. This means either you’ll have to be close by to take care of some of these typical maintenance issues or hire someone to do it for you. A home that consists of mostly young adults will typically endure more wear and tear than a home with an established family or busy professionals. Expect the carpet, walls, and common areas to see their fair share of use.
A buy-to-let property targeted at students allows you to collect rent from multiple sources in a single month, but also leaves you open to the risk of higher turnover. Students graduate, move, drop out, or move back home with their family at any given moment, leaving you with an empty bedroom and less rental income. This is something to consider when renting to students.
Income Potential
Having multiple tenants in a single property can dramatically increase the amount of income you are earning each month. Home prices in areas like Reading and Brighton average around £370,000, and landlords can charge anywhere from £425-500 a month per person, generating an average monthly income for landlords of £2910-£2975 for a six bedroom home. This is just an example, as home prices and average rental rates vary significantly across the UK. According to Fortune Builders, a property near a popular university can yield 30 to 40% higher rates than comparable properties located further away from the school.
There are 130 universities throughout the UK, all of which attract thousands of young adults each year. Investing in housing in and around university towns can be a smart and profitable investment for both new and seasoned investors.
Read Nick Statman on Medium.