If you’re considering investing in a buy-to-let property in a university city, student accommodation could be the most profitable option.
Renting to students isn’t too different to managing a standard buy-to-let, but there are additional rules and regulations that landlords should be aware of before they begin their search.
In this article, we will find out a little more about why so many property investors are choosing student accommodation and how to get started with your first student investment property.
Why are student lets such a good investment?
While student lets operate in much the same way as a standard buy-to-let, there are several benefits to renting to students that can make them a more lucrative proposition.
High demand – According to Cushman and Wakefield’s Student Accommodation Annual Report, there are now 2.2 million full-time students studying at UK universities. More UK nationals than ever are signing up for higher and further education each year and the number of international students studying in the UK is also increasing. The steady demand for student accommodation across the country makes student buy-to-lets a reliable investment.
High rental yields – Most student accommodation investments are HMOs, which means that landlords can charge per room rather than per property. Student landlords are generally able to achieve a higher rental yield by charging per room rather than per property as they would with a standard buy-to-let.
Affordable properties – While purpose-built student accommodation investments can be expensive, if you go down the route of buying an HMO student property within an inner city location or a student suburb, then property prices are usually more affordable.
Overseas student applications set to double – While demand for student accommodation is high now, it only looks set to increase. According to UCAS, the UK continues to be a desirable destination for study, and applications from international students are predicted to increase by almost 50 per cent by 2026. With overseas students rarely having the option to live with family when studying abroad, this figure looks set to further increase the demand for student property in the UK.
Requirements for investing in student property
Receiving approval for a student buy-to-let mortgage can be tricky, so before you start browsing buy-to-let properties, it’s important to first check if you meet the requirements.
Property owner – While it is not impossible for a first-time buyer to get a student buy-to-let mortgage, it is significantly harder and not possible for everyone.
Landlord experience – Most lenders prefer those applying for student buy-to-lets to already have experience working as a landlord. If you have never owned a buy-to-let before, then you may still be able to get a mortgage if you meet all other requirements, but it is likely to be more difficult to find a willing lender.
Deposit – Buy-to-let mortgages of any kind require a higher deposit than standard mortgages. Most student buy-to-let mortgages require a deposit of 25 per cent of the property value.
Good credit score – Lenders will want to check how reliable you are at borrowing before they approve you for a buy-to-let mortgage, they will do this by checking your credit score. The better your credit score is the better your chance of securing a good deal on a student buy-to-let mortgage.
While many lenders offer student buy-to-let mortgages, not all do, so you may need to shop around a bit to compare the deals being offered by lenders that provide the service.
How to invest in student property
Follow these 10 simple steps to get your first student accommodation investment UK up and running.
- Select a suitable area to buy in
Doing your research and carefully selecting the area that you buy your student let in will significantly reduce the risk of your investment. The best areas to invest in student buy-to-lets are locations within university cities that are known to be student hotspots. These areas are usually close to campus and within walking distance of local amenities and nightlife.
- Decide which student property type to invest in
There are two main types of student property to choose from, HMOs (houses of multiple occupancies) and purpose-built student accommodation (PBSA). PBSA tends to cost more to invest in because they are usually found within new buildings and offer premium student accommodation. HMOs can require a little more maintenance, but the right property can offer excellent returns on investment.
- Find a student property investment specialist to partner with
Partnering with a student property investment specialist, like the team here at Mistoria Group, can help to ensure the success and profitability of your investment, and help you to achieve the maximum returns possible for your money. Mistoria Group has helped countless student landlords, with student properties in the North West England, to invest in high-yield student accommodation in popular student areas like Liverpool, Manchester, Salford, and Bolton.
- Find a suitable property
The property you buy and the location it is in will influence how profitable your investment is, so choose wisely. Student housing should be close to campus, amenities, and nightlife, preferably within walking distance of all three. Buying a property with multiple living spaces that can be converted into additional bedrooms can also help to boost the profitability of your student buy-to-let.
- Get a mortgage in principle
Getting approval for a student buy-to-let mortgage can be more challenging than it is to get a standard buy-to-let mortgage. For starters, you’ll be required to put down a deposit of about 25 per cent of the property’s value. Many lenders also prefer for you to already have landlord experience. Be sure to do your research and shop around to ensure that you get the best deal.
- Get an HMO licence
If you decide to invest in a student house rather than a PBSA then it is likely that you will be required by law to obtain an HMO licence before you can begin renting the property to students. Your student property is an HMO (house in multiple occupancy) if it is going to be shared by three or more tenants from different households. The standard fee for a student HMO licence is £1,420 and you can apply for one on the government website.
- Understand the student accommodation regulations for landlords
As well as obtaining a student HMO licence, you will also need to ensure your student accommodation is safe and comfortable to live in. Student landlords are obligated to ensure their student let meets all of the relevant student accommodation rules and regulations. Failure to do so is a criminal offence.
- Prepare your property for tenants
Depending on the age and condition of your property, it may need some repairs, maintenance, and alterations to get it up to the required standards to let it to students. You will also need to have all gas and electric systems and appliances serviced by a professional to ensure they are safe. The house should be decorated simply and fitted out with all the basic fixtures, fittings, white goods, and furniture that students require to live comfortably.
- Prepare your student tenancy agreements
The student tenancy agreement contains all the important information about when the contract starts and ends, the deposit, the terms of the tenancy, how and when rent is to be paid, the guarantor, and more. The tenancy agreement is a legal contract and must be signed by both the landlord and tenant to confirm that they understand their responsibilities.
- Hand over the keys
Once you’ve got all the other points covered, you should be just about ready to go! All that’s left to do is create an inventory detailing the contents of the house to hand over to your new tenants along with the keys to the property and an up-to-date copy of the property’s gas safety record.
If you require any advice on investing in student property, the team at Mistoria Group can help.
From selecting a suitable property in a profitable area to managing the day-to-day running of your student let, our comprehensive range of specialist student property investment services have helped many investors throughout the North West of England to find lucrative student accommodation investment opportunities in areas like Liverpool, Manchester, Salford, and Bolton.
To find out more about our specialist student property investment services, give our team here at Mistoria Group a call on 0800 500 3015 or email info@mistoriagroup.com.
