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Should student housing be your next property investment?

Students in a kitchen

Only one in five landlords are willing to rent to students - but by dismissing this tenant type, landlords could be missing out on some of the highest yields in the property market.

Our research looked at yields on popular student streets in the UK’s top 20 University towns, to create a new student yield league table. Student house yields outstripped similar properties in the same areas by an average of one third.

  • 11.53%yield at Durham University, the top of our league table
  • 1/5the number of landlords prepared to rent to students
  • 2.78%yield at bottom of the league Oxford University
  • 33%average difference in yield between student and non-student properties in the same area

The student yield league table

Yield Position University Yield National University Ranking Position*
1 Durham 11.53% 6
2 Warwick 10.25% 9
3 Manchester 8.48% 18
4 York 8.24% 21
5 Sussex 8.19% 25
6 Loughborough 8.11% 7
7 Nottingham 7.38% 17
8 Lancaster 7.38% 8
9 Bristol 6.88% 15
10 St Andrews 6.77% 5
11 Birmingham 5.63% 15
12 Surrey 5.61% 19
13 Bath 5.52% 11
14 UEA 5.33% 14
15 Edinburgh 5.24% 23
16 Exeter 4.56% 12
17 London 4.53% n/a
18 Cambridge 4.28% 1
19 Leeds 4.17% 13
20 Oxford 2.78% 2
Durham University

14 Simple tips for renting to students

  1. Run the numbers - and make sure you include the price of insurance, wear and tear and redecoration in your calculations.
  2. Check with the Local Authority if the property is considered an HMO (House in Multiple Occupancy). You might need a licence and you will have extra obligations to your tenants in terms of safety equipment and measures.
  3. Bigger isn’t always better. A smaller property might have a higher annual yield with less risk.
  4. Make a detailed photographic inventory, and get tenants to see and sign it before they move in.
  5. Use parents as the guarantor for student tenants.
  6. Paint the walls. A quick clean and a lick of paint will have your property ready for the next year’s tenants.
  7. Choose hard-wearing furniture (including plastic covered mattresses).
  8. Inspect the property at least 4 times per year, and ensure this is a part of your tenancy agreement. Go into every part of the property, including the loft.
  9. Consider a cleaner for communal areas to help maintain and keep an eye on your property.
  10. Students don’t garden. Make sure your agent or an appointed company keep on top of garden maintenance.
  11. Provide a house manual detailing things like how appliances work, recycling responsibilities and rubbish collection, and any other house rules.
  12. Install a smart meter or pay as you go system for utilities so you and your student tenants don’t get any surprises
  13. Consider extras on your insurance, including Key protection, and Accidental damage.
  14. Plan for lots of electronics. Get extra plug points fitted in bedrooms to avoid multi-way adaptors.

Why landlords should consider renting to students

Carl Agar, landlord, developer and letting agent at Big Red House

Carl Agar

“There’s no doubt that students have a bad reputation for parties, accidental damage, and unreliability, and many landlords won’t touch them with a barge pole. But there is still money to be made in this market - if you go into it with your eyes wide open.”

1. Steady supply

Despite the rise and rise of tuition fees, the UK’s student rental market continues to grow. There were about 2.3 million students enrolled in higher education in the UK at the beginning of 2018 – a figure that has remained stable for a number of years.

2. Less risk of arrears

Students are also less likely to fall into rent arrears. Richard Lambert, chief executive of the National Landlords Association (NLA), says: “While letting to students is not for everyone, those who do would be surprised by these findings, because student lets offer the highest rental yields and are least likely to experience rental arrears compared to other tenants, such as professionals, couples, or families."

3. Easy marketing

Students will most often sign contracts for a full academic year, so you won’t have to face dealing with different tenants every six months. Peak times of demand are also relatively consistent, allowing you to focus your advertising expenditure, or alter your asking price as and when this is necessary.

Linking with universities or local letting agencies could also give you a captive audience to market your property to.

4. Higher rental yields

Students are a captive high-yield market.

They are most often let to larger numbers of tenants than standard rental properties. With a higher number of tenants and a surge of seasonal demand concentrated in the same places, you can expect increased profits from your initial investment.

5. High demand

A survey by student lettings app SPCE showed just how anxious students are to find a rental property.

Some six out of 10 students said securing a rental property was more stressful than job hunting, studying or their end-of-year exams.

Two-thirds of students questioned cited poor communication from landlords and estate agents as a major issue.

Tom Cooper, Director of Underwriting, Simple Landlords Insurance

Tom Cooper

“Often students don’t deserve their bad reputation. With university fees today’s students take their studies much more seriously, and many also work to see themselves through the semester. It’s not quite the hard-partying picture many have of student life.”

6. Parental support

You're not just renting to students – realistically you’re renting to their parents too. Leon Ifayemi, CEO of SPCE, a student lettings app, said: “With parents acting as guarantors, there’s a very low risk of students not being able to pay rent on time or provide compensation for damages,".

7. Calculated risk

Getting the right insurance for your student house means you can rent out to this market with peace of mind. Tom Cooper at Simple Landlords Insurance said: “Don’t miss out on a great investment opportunity and sky high yields because of tenant type. That’s what insurance is for. Get the right cover, and inspect regularly to keep an eye on things before they can escalate.”

Bindar Dosnjh, Female Property Alliance, Smart Core Wealth

Bindar Dosanjh

“Sometimes, things can go wrong with any kind of tenant. If you’re insured you can put it right with the minimal amount of fuss or personal expense. Having specialist landlord insurance is essential - and a good insurer will help you find the right balance of cover to premium for your particular properties and tenants.”

What to think about before you invest

  • HMO regulations

    It’s likely your student house will be an HMO (House of Multiple Occupation). Check with your council whether you need a licence, and whether your property meets standards around fire, gas and electrical safety in terms of fire doors, alarms, and safety equipment.

  • Tenancy agreements

    Whether you rent on a single AST or require everyone to have individual tenancy agreements, make sure yours is water tight. Be clear on issues like sub-letting, and add in a clause about what will happen if one tenant leaves in terms of rent and replacement.

  • Deposits

    If you’re letting under an Assured Shorthold Tenancy (AST), your deposit must be held in a government-approved Tenancy Deposit Protection Scheme.

  • Council tax

    Remind your tenants that they are exempt from council tax, but will need to apply for an exemption certificate.

  • Right to rent

    If you’re renting out to foreign students, make sure you check documentation under the government’s Right to Rent rules.

  • Insurance

    Remind tenants that they are responsible for insuring their own personal possessions – these won’t come under your landlord’s contents policy.

Statistics for the National University rankings are from https://www.thecompleteuniversityguide.co.uk/league-tables/rankings