According to Paragon Mortgages, student lets typically outperform any other type of rental: landlords can expect to earn an average income of 6.45%, compared to 5.94% if you were renting to young professionals. Clearly, this is a potentially lucrative form of letting, but you need to do your homework to get it right. Here is what you need to know.

Top Tips
1. Renting to students tend to mean a higher rental yield
2. Increased paperwork due to HMO rules – plus you typically have to find new tenants every year.
3. Students are exempt from Council Tax – make sure that they fill out the necessary forms otherwise you could end up paying it.

Type of property to buy
Generally, houses in areas a walk or short bus ride from a university. Proximity to a pub is likely to be a major draw.

Renting out individual room vs a whole house
Some landlords choose to rent out individual rooms in the house, potentially for first-year students or anyone not in a group looking for accommodation. The yields for this type of property tend to be higher compared with renting the property as a whole house, but you need to be prepared for extra work. Generally, landlords find their tenants through an agency: like Upad or a local agency, or through the university or college housing service. There is increased administration: as with private rentals, all student tenants have to sign a tenancy agreement, and have their deposits registered with a protection scheme;in addition, you’ll have to ensure each door has a look and there are suitable communal areas.

The pros
The yields;how good your yield is depends on where the property is. According to Paragon, Central London will see the lowest average yield (5.5%) - because of the high initial costs of purchasing property. Meanwhile the West Midlands, close to Warwick and Birmingham universities, has the highest, at 6.5%.

The cons
Maintenance costs are likely to be higher, and this is strictly an investment for people who view their investment dispassionately and are able to relax, to a certain degree, about beer stains on the carpet. There is quite a lot of work involved with this type of rental: you’re most likely going to have to find new tenants every year. There is also increased paperwork, because you’re letting a House of Multiple Occupancy (HMO). See here for more information.

Need to know
Full-time students are exempt from council tax. It’s a good idea to ensure the tenancy agreement stipulates that your tenants are responsible for obtaining any exemption that may apply, and that they are responsible for the tax bill if the relevant paperwork hasn’t been obtained. Some landlords have ended up footing the bill, as the paperwork hadn’t been obtained from the college or university, and forwarded to the local council.

Top tip
“When letting to students, you need a floor plan” says Phil Carter, lead developer at Upad. “Every student has different needs: there is always one person in the group happy to have the smallest room in the house at a reduced rent, for example, and architecture students need space for their models. Having a floor plan lets the group decide which properties are going to meet their needs, meaning less wasted viewings for landlords, and tenants.”

Related posts:

  1. Institutional investors eye student housing
  2. Private landlords advised on student letting
  3. Student accommodation demand remains
  4. Income risk for private landlords in student market
  5. Student private landlords asked to be patient

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