Guide to becoming a student landlord

As the number of university students continues to increase, so does the demand for student accommodation. With impressive yields on offer too, many buy to let landlords look to invest in this sector. Buy to Let Consultant, Deepinder Bhangoo, explains what you need to know to be a student landlord.

Why Student Lets? 
Despite the many challenges, 2020 was a record year for the number of young people applying to go to university. According to UCAS, over 500,000 people applied for undergraduate degrees in the UK, up 1.6% on 2019. 40.5% of 18-year olds applied to attend higher education, and there was a 10% increase in the number of applications from students outside of the EU, nearly 90,000. 

While many universities are trying to meet the demand for accommodation with purpose-built student accommodation (PBSA), 54% of UK students live in properties rented by private landlords (Guide2Research). Ultimately, in most university cities, there is a limited amount of available space to build these large PBSA complexes. According to UCAS/Knight Frank research, location is the top influencing factor determining how happy students are with their accommodation; the ideal being both close to campus and local amenities (more in this later). Therefore, existing residential properties are more likely to meet these requirements and the increasing demand for accommodation. 

Some landlords may be hesitant to enter the student let sector, as historically students haven’t had the best reputations as tenants. However, as many students lets are HMO properties, they do attract higher yields than their vanilla counterparts. Coupled with a continued and increasingly high demand, student let properties for make for an attractive investment opportunity for any buy to let landlord. 

Where are the Highest Yields for Student Lets? 
Research conducted by Howsy compared rent yields across the UK’s top 50 universities. On average, student let properties attract a very respectable yield of 4.4%. The top three highest-yielding universities could all be found in Scotland: The University of Dundee (7.2%), University of Aberdeen (6.8%) and University of Strathclyde (6.6%). 

Unsurprisingly, the three lowest yielding universities from their list were all in Central London: London School of Economics (2.3%), King’s College London (2.3%) and Imperial College London (1.7%). However, it’s worth noting that the average monthly rent here is over three that of the University of Dundee, at £2,886 per calendar month. 

Top 10 UK Universities for Rental Yields 

University 

Location 

Average House Price 

Average Rent Per Month 

Average Rental Yield (%) 

University of Dundee 

Dundee 

£146,000 

£876 

7.2% 

University of Aberdeen 

Aberdeen 

£101,035 

£576 

6.8% 

University of Strathclyde 

Glasgow 

£160,147 

£883 

6.6% 

University of Leicester 

Leicester 

£121,517 

£664 

6.56% 

Aston University 

Birmingham 

£145,640 

£793 

6.5% 

University of Leeds 

Leeds 

£138,775 

£741 

6.4% 

Nottingham Trent University 

Nottingham 

£160,099 

£852 

6.3% 

Newcastle University 

Newcastle upon Tyne 

£154,535 

£816 

6.3% 

University of Liverpool 

Liverpool 

£143,576 

£730 

6.1% 

Cardiff University 

Cardiff 

£172,917 

£843 

5.9% 

What are students looking for? 
As mentioned above, location is critical for a successful student let property. According to Save the Student, the average student lives within a 20-minute walk of their university campus. As most universities restrict the number of parking permits for campuses, the majority of students either walk or use public transport. 

While the term student accommodation may conjure images of tatty “digs”, this is not the case anymore. The quality of accommodation is another crucial consideration for house hunting students; ensuites and fast internet has become standard in PBSA, and this is translating into the private rental sector too. Spacious bedrooms are also a sought-after feature for many students, so best to avoid box rooms! Properties with clean, modern interiors attract higher rents, so while this may require some initial refurbishment costs, it’ll put you in good stead and high demand! 

When do Students Look for Accommodation? 
The academic year in the UK may be September to July, but don’t be fooled. Students start the hunt for their next year’s accommodation within the first term. Research by Save the Student shows that November is the key month: 12% will start looking before then, and 18% will begin the search during this month. The second peak comes in January when around 16% start the search; however, it’s well known that competition for the best accommodation is fierce! 

Of course, this pre-planning is fantastic as a landlord, as it ensures that you can arrange your next tenancy contract around six months in advance! If you’re planning to invest in student accommodation, it’s essential to make sure your property is ready for viewings almost as soon as the autumn term is underway. Otherwise, you may miss out on the prime property hunt season! 

What about finance? 
If you have four or fewer tenants on a single tenancy (AST), some lenders will accept student let property applications on vanilla (standard buy to let) products. If you’re looking at properties which can accommodate for five or more students, then you’ll move into HMO mortgage territory; nothing to be worried about, it just requires a more specialist buy to let lender! 

There are plenty of products available to both personal name and limited company investors. Most lenders will require you to have experience of being a landlord, through either previous HMOs or standard buy-to-let properties. However, some will consider first-time landlords, so if you have no prior landlord experience do speak to a mortgage broker who can help advise you on the best product for you. 

Landlords have been looking at different ways to improve their yields following the tax relief restrictions announced in 2015, resulting in student lets and HMOs generally becoming a more popular option. This interest has encouraged competition from lenders and as they seek to find new areas in which to lend to boost their lending figures, meaning that mortgage rates for student lets are competitive. 

Things to Consider When Investing in Student Lets 
Most lender offer conditions will preclude the borrower’s own children living in the property, so, if you are looking to buy a property for your own child to live in whilst studying, you should take advice from a mortgage broker on the best product for the property. 

Beware of licensing requirements for the property. If the property is large enough to be categorised as an HMO, you must check with the local council to see if it needs a license. If it does, you will need to ascertain whether your chosen lender requires the licence in place before completion, or whether they will accept proof that you’ve applied for one at the point of the mortgage application. Again, your broker will be able to help with this. 

What next? 
Whether you’re looking to invest in your first student let property, expanding your portfolio or need finance for refurbishments, we can help you! Contact me, Deepinder Bhangoo, on 01732 471 661 or email deepinderb@mortgagesforbusiness.co.uk and I’ll be more than happy to assist! 

*Updated November 2020. 

NB: ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

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