The Advantages and Challenges of Being a Student Landlord

Being a student landlord is a popular business model that has plenty of advantages, although it also comes with challenges too. Student lets are common among landlords looking for an assured source of income.

The UK student let market has continued to grow over the past ten years and despite a blip during the Covid pandemic, it has survived challenging times and come back stronger.

Student accommodation© Monkey Business Images / Shutterstock

Britain’s world-leading higher education system attracts plenty of overseas students, as well as home-grown talent, so the market is secure, with around 2.3 million students currently in higher education in the UK.

With a new academic year starting in September, many students are already searching for accommodation amid potentially record levels of demand.


Students aren’t fussy

While this may sound like a sweeping generalisation, students tend not to care about living in luxurious surroundings. While certain standards must be met for health and hygiene reasons, most students won’t mind what colour the carpets are.

It’s important that the Wi-Fi works and there’s plenty of communal space, with shops and public transport in the vicinity, but they won’t expect the same standards as a professional couple, for example.

It can be easier to attract students when you invest in the right property in a popular area, so do your research before branching out. The best student accommodation comprises an old property with large rooms and at least two bathrooms and toilets.

If there’s a second reception room, you can convert it into another bedroom, making the property more profitable. The Homes (Fitness for Human Habitation) Act 2018 requires that residential rented accommodation is maintained in a state fit for human habitation.

While no tenants want to live in squalor, there’s no doubt that landlords will need to spend only a relatively small amount refurbishing a student property, compared with other types of tenants.


Good supply of tenants

Finding and keeping good tenants is easier when you have a student let. Most will rent accommodation near their university. While first-year students tend to live in halls of residence, many of them move into private sector lets in their second year. By this time, they have made friends and often wish to share accommodation with them.

If you’ve done your homework and invested in a buy to let property in a busy student catchment area, you’re likely to have a steady flow of tenants every year.


Best rental yields

Student rental yields are higher than average, with the top buy to let regions including Manchester and Nottingham – Nottingham’s booming student population exceeds 37,000 today, with an average yield for the city’s student landlords at around 11.9%.

This is much higher than in London, where the average yield is only around 5%, mainly as a result of high property prices. Choose your area wisely and you should get a great ROI.


Short-term contracts

When you’re a student landlord, it’s unlikely you’ll need a long-term contract, as your tenants will be unlikely to stay for longer than 12 months. This is useful if your tenant turns out to be unreliable, as you won’t be stuck with them for years.

Student lets traditionally have lower void periods, which occur when a tenant leaves a property and you can’t find another one quickly enough, leaving you without rental income.

While the academic year normally runs from September or October to July, many students will sign up for a 12-month lease, leaving them with a place to store their possessions over the summer break before autumn term begins. This can reduce the void periods considerably.

It’s also likely that you’ll receive your rent upfront, as many students prefer to get the payment out of the way as soon as they receive their student loan. This is good news from a cashflow perspective.

There are also a number of challenges for student landlords. However, most of them can be overcome, with the pros outweighing the cons.


Furnished accommodation

Student housing furniture is non-negotiable, as most of your tenants will be leaving home for the first time, so they certainly won’t have any of their own.

The majority arrive at university with their laptop, clothing and not much else. You’ll need to provide a bed and other bedroom furniture, plus white goods and items such as a sofa and armchairs for shared areas.

While some landlords traditionally buy second-hand items, it can be more cost-effective and less hassle to look into furniture packages for landlords from a specialist supplier. Make sure you budget carefully for the costs of HMO furniture. This is actually one of the main challenges of letting student properties, but it’s something Furniture Pack Solutions can help with.

This leads onto our next point: student properties suffer greater wear and tear. This doesn’t mean your rental property will be wrecked, but some breakages and sub-standard kitchen hygiene are quite common.


Competition for student lets

The purpose-built student accommodation market in the UK is worth around £3.9 billion annually, so it’s to be expected that more landlords are joining the sector every year. Landlords are spotting the potential of the student sector and are investing heavily.

Competition is increasing in towns and cities all over the UK, so it’s important to do your research before investing your hard-earned cash. Check the market demand in your chosen area and ensure you’re not battling low-price housing schemes marketed by wealthy developers.

Once you’ve chosen your area and purchased a property, ideally you will need tenants who have a guarantor. Most students won’t have a credit rating, so they will need to provide a responsible person, such as a parent or guardian, to guarantee the rent if the tenant fails to pay.


Anti-social behaviour

Finally, students have a reputation for loving to party. If your property is in a quiet residential street, it’s likely there will be complaints from neighbours if the tenants host a raucous party.

You don’t want to be a landlord who permits anti-social behaviour, but it’s easy for a small gathering to get out of hand after a few drinks. You’re responsible for any student tenants who upset their neighbours, so be prepared to cooperate and take action, should the local council receive any complaints.

In conclusion, while it isn’t necessarily all plain sailing, student rentals can be one of the most profitable areas of buy to let properties, but make sure you have a workable business plan.

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