Landlords can expect a higher return on student properties than most property investments today. This is due to thriving student rental income, according to a study by estate agent Knight Frank.
For example, a typical studio flat in Exeter is now worth £85,000, a strong increase from its £65,000 purchase price. This flat would receive £515 in monthly rent from a student.
Based on these prices, this flat would produce a £6,180 income annually before tax and letting agents’ fees. This is equivalent to more than 9% yield based on the original value of the property.
Landlords looking to move into this sector are advised to look for small houses that would be suitable for modernisation. These properties benefit from being near a university, or with good transport links.
Within a decent area, the house can be updated to suit student occupants. Reception rooms can be converted into bedrooms, for instance. It is important, however, to ensure that prospective landlords have checked whether they must register their property with the local council, if it is to house a large number of students. Details can be found at landlordzone.co.uk on this matter.
New-build flats or houses are more expensive to buy, and generally are smaller than older homes. Nonetheless, rents tend to be higher on newer properties.
Top 5 university locations for prospective investors
| 1 | London | There are more than 250,000 students within the capital city. In 2011, the average weekly rent paid for a student flat was £278. An en-suite room in a shared property was £210 a week for a student. |
| 2 | Brighton | The University of Brighton holds about 21,000 students, alongside more than 12,000 at the University of Sussex. |
| 3 | Edinburgh | Scottish and EU students are exempt from fees within Scotland, so demand is high. The University of Edinburgh has calculated that the average rent paid per week by students in either shared accommodation or individual flats, is between £70-£76. |
| 4 | Durham | As a small town with over 11,500 undergraduate students, Durham is in high demand of low-cost accommodation for its students. |
| 5 | Manchester | Rooms or apartments can vary from £50 up to £140 a week, according to accommodationforstudents.com. |
John Heron, of Paragon Mortgages, who arrange mortgages in the student division, explains: “Student property is appealing to landlords as they usually benefit from higher than average rental yields, as rooms tend to be let on an individual basis. And there are generally lower arrears, as tenancy agreements benefit from parental guarantees.”[1]
Knight Frank estate agents have compiled a league table of target markets for landlords, based on student numbers and outstanding demand for accommodation.
Knight Frank predicts an average 5% rise on student rents across the UK in the next 12 months. This figure is significantly than estimations for the mainstream lettings market.
“The winners will be prestigious universities amid a flight to quality, as students search for the best course for their fees,” says James Pullan, of Knight Frank.
He warns, however, that there will be a greater need for high-quality accommodation, due to rises in university fees: “The new rules will engender the rise of the student-consumer. They will be paying a great deal to study, and are likely to become much more discerning over housing.”[1]