Students can be Great Tenants

Many landlords have begun their careers by letting out student properties. Many investors, or even the parents of those students, may want to consider the occupation.

The student letting market has defied the current economic climate, with record highs in students applying to university. Recent numbers indicate that the amount of students aiming for higher education this year is up by 57,000 on last year.

The UK student population has increased steadily in the last decade, say estate agents Knight Frank. Total figures have risen from 1.8 million in 1997, to 2.5 million in 2007. Savills also predict this will grow to 3 million by 2014.

This increase has been predominantly down to the amount of UK undergraduates, potentially attempting to stay out of the unemployment figures. There is also a trend in a growing number of overseas students at UK universities, which has risen by 67% in the last 10 years.

Students can be Great Tenants

Knight Frank revealed that 11% of students were international in 1997, and 21% were postgraduates. These numbers rose to 15% and 24% respectively by 2007. Both of these types of students will look for purpose built private student houses, over than shared housing. The amount of overseas students is also predicted to increase to 21% by 2018.

Knight Frank has also issued a report indicating that there is a shortfall of 100,000 bedrooms for students, in London alone.

Student landlords may need certain skills to manage these properties, however. It can be a complicated process involving much more regulation than standard buy-to-let properties. This is due to many student properties being Houses in Multiple Occupation (HMOs).

If a landlord lets a particular type of HMO, they may need a licence from their local authority. This will mean properties must have certain fire and accommodation standards, which can be costly. These alterations may also halt the appeal of the property to homeowners when it is being sold.

If possible, landlords should try to avoid HMOs. This can be achieved by letting a property to 4 or less tenants, as 5 or more will require an HMO licence.

Student properties are also mostly furnished, and this can be expensive. There may also be regulations over the level of furnishing, which is specified by the university.

Nonetheless, students can be great tenants. A few reasons why are:

• Landlords can accommodate more students into one property. 3-bedrooms houses can often be converted into 4-beds. This can create greater yields.
• Students are not as concerned over décor as professionals. They are less likely to care for modern kitchen and bathroom suites. However, halls of residence are now raising their standards and offer high quality furnishings, and mature or foreign students may have higher standards.
• Rent may be paid in advance. Students, or parents, may pay rent upfront for a whole semester.
• Catherine Bancroft-Rimmer, author of The Landlord’s Guide to Student Letting, believes that having student tenants makes life easier. “Once you’ve explained why you need them to do something, they are usually quite willing to go along with it,” she says. “From my experience, there is nothing worse than trying to resolve a problem with a thick tenant.”¹

In certain areas, such as London, there is a lack of supply to a high demand for student accommodation. However, it is still key to stay local.

An aspiring student landlord should understand the area and speak to local letting agents and the university’s accommodation services to gain knowledge of the market.

Competition in other places can be strong, also. Director of Accommodation for Students (AFS), Simon Thompson, says that some areas are oversupplied: “Leeds is quite overpopulated with student accommodation, as are the Fallowfield and Withington areas of Manchester.”1

It is advisable to landlords that they contact local planners to discover what may be coming, in terms of student properties, in the future.

Strong demand within London has seen rents increase by 10%, however this relates to London’s position as the centre of higher education in Europe, with over 40 universities. The rest of the UK has seen rents grow by 8%, but this still soars past the remainder of the residential letting market, in which rents dropped by around 2% in the last year, says Rent Index.

AFS revealed that the average weekly rent for students in the UK is also rising. The cost is now £62.40, up by 1.5% on last year, and a great 19% from five years ago. This figure accounts for purpose built student accommodation and private rental properties.

Students often choose to live in halls of residence in their first year, but will generally move into a house with three or four others afterwards. Postgraduates often search for a property that offers a relaxing working environment, whereas undergraduates look for housing in the city centre, near good nightlife.

Editor of Property Hawk, Chris Horne, says: “If you can find out where the cool bars and places to hang out are, then a property close by will definitely have a marketing advantage.

“Essential is that your property has good access by public transport to the university campuses as well as the nightlife and basic shops and services; not all students have cars.”1

Victorian terraced houses can often deliver generous room sizes for the student market. Large rooms are appealing, as students will often use these areas for studying and withdrawing from communal living spaces. A property with three double rooms and a living room can provide accommodation for four students.

Not all insurance companies will offer cover to student landlords. They should be made aware of any tenants that may be students, as a claim can go against the landlord should this be revealed at a later date.

¹ http://www.propertyhawk.co.uk/index.php?page=magazine&id=403