Letting to students can be a very attractive prospect for a private landlord. The student market benefits from very high demand, and with the number of students going to university continuing to rise, there is likely to be very little shortage of potential tenants to accommodate.
Letting to students can also be very profitable, as properties tend to be shared among larger groups of people and are consistently shown to offer high, competitive rental yields. When managed properly, a property let to students can be both a rewarding and reliable earner.
However, as with any investment, such properties are not entirely free of risk. Student accommodation is, understandably, a more niche part of the lettings market, and therefore requires a particular approach, expertise and understanding of the issues at stake.
To help you decide whether the student market is for you, we’ve listed some of the pros and cons of letting student property. Whether you are a newcomer to buy-to-let or an established landlord considering a move to student letting, we have plenty of useful tips and advice on the benefits and drawbacks of opening your doors to a more university-bound clientele.
Students have been shown to be more profitable and, according to the latest NLA research, offer the highest rental yields compared to other tenant types, at an average of 6.5% – higher than professionals, couples, singles and families.
- Landlords can let property to larger groups
Student lets are usually Houses of Multiple Occupation (HMOs), which (as the name suggests) are properties that are shared among a group of 2 or more households. HMOs also offer higher yields as you have more rooms you have to let, thus increasing your potential rental income.
- Students are the least likely to fall into rental arrears
Landlords letting to students are the least likely to experience incidences of non-payment of rent. NLA research shows that out of all landlords who had experienced rental arrears, just 33% of student landlords had experienced incidences of arrears, below the average of 35%.
- High Demand
Students need places to stay during term-time, so attractive and affordable student accommodation is always a desirable and in-demand commodity. Record numbers of UK university places have been offered this year, charting a 3% increase since the day that A-Level results were released last year, in 2015.
- Void periods
Student accommodation tends to be for the short-term, with students both leaving at the conclusion of their degrees, and also at the end of term years. As such, the turnover is much higher, which can result in void periods when properties go unoccupied, as well as more time spent trying to find new tenants. Nearly a third (28%) of student landlords experienced voids this year, with the average void period lasting for 62 days.
- Wear and tear
Most, if not all, students may have never lived away from home before and this can mean that students are less likely to keep up with routine maintenance of properties. In addition, properties may also suffer more damage and wear and tear due to higher turnover and stereotypical party lifestyles.
- Harder to screen tenants
As mentioned, university will be the first time many students are living away from home, and it may therefore be difficult to get both references and credit checks from them. Many landlords counter this by taking slightly larger deposits or asking for a guarantor.
- Greater regulation
While HMOs can be profitable, there is far more regulation surrounding them than for other buy-to-let properties. Mandatory HMO licensing exists across England, with fines and penalties for those who break the law.