Demand from students set to grow
The student accommodation market has grown steadily over the last 20 years and is set to continue. A survey on the subject from property consultant Savills suggests that universities don't have the resources to increase the supply of accommodation to keep pace with the expansion of students, resulting in "a clear opportunity for further private sector involvement for both developers and investors."
The present shortfall in student accommodation is regional. The market is in equilibrium or saturated in some parts of the country but in others there are not enough properties for students to let or the accommodation that is available is of poor condition. In some places, such as Bristol and Bath, there isn't enough property to meet student demand.
Yield over capital growth
Yield, the amount of income you receive as a proportion of the value of the property, is probably the way you'll make money when it comes to student buy-to-lets. Landlord Mortgages statistics show that the average gross rental yield on student properties is nearly 8%, more than 1.5% above the rental market as a whole.
This is achievable because student rents are normally calculated per room. In addition, students stick around to see out their courses, and may even want to stay in the same property for the course duration, cutting down on void periods.
Another option is to buy a property for your own children to rent off you - providing them with a great place to live while studying and you with a dependable tenant and an investment for the future.
Choosing the right property and location
Savills says that the shortfall between the supply of accommodation and student numbers is most acute in London and the south-east. A good tip is to buy in a town or city with two or more universities.
When it comes to the type of property, look for those with the potential to make an extra bedroom from a second living room - maximising the number of students the property can sleep without having to pay for a larger property in the first place.
New-build schemes are also worth considering as they offer better quality accommodation and students will be more inclined pay higher rents for warm, well-maintained accommodation. In Manchester there has been high demand for new build rooms and a corresponding increase in void periods for more dilapidated traditional houses. Just beware about pitching the rent of a new build too high. The other advantage of buying brand new is that you can buy off plan - hopefully cashing in on capital appreciation in a rising regional market.
Be prepared for high jinx and high maintenance
It's important to recognise that student life almost inevitably incorporates frivolity and partying. And students generally don't pay much attention to house work or decoration, so be prepared for a high-maintenance programme. Expect to replace kitchens and bathrooms every three to five years, and carpets every 24 months. In addition, the whole house will need redecorating every two to three years. Make sure you budget for this.
How to let your property to students
Lettings are traditionally arranged by registering your property with the university accommodation office. However, the VarsityLets (see useful contacts at the end) lettings and management service aims to match properties to students. Landlords also benefit from a 12-month tenancy agreement and therefore no voids, while tenants are assured of properties kitted out and maintained to a stipulated standard. VarsityLets also operates a property search and acquisition service for investors, identifying the localities and properties most likely to appeal to student tenants.
Useful contacts
Savills student accommodation agency - 020 7535 2962
VarsityLets - 020 8722 5811
Landlord Mortgages - 0118 375 8450