Some property investors are put off student accommodation by the scare stories they read about in the media, but there are many reasons why investment in this area can lead to big rewards.
That’s not to say it’s without its own set of risk factors, but investing in student accommodation – when done right – can be very lucrative.
Below, using our experience as estate agents operating across Essex, Hertfordshire and north and east London (all of which are student accommodation hotspots, by the way!), we outline the main pros and cons of letting out your rental property to those carrying out degrees.
Demand will nearly always be high if you invest in areas with a high student population and then target your property effectively to this demographic.
This pool of prospective tenants is also refreshed at the beginning of every academic year, meaning you won’t have to try too hard to occupy your property during term time. Rental income will therefore be regular and you should receive a good early return on your investment.
Demand is also resilient. Students, for the main part, rent while studying. That’s just the way it is and probably always will be. It’s a guaranteed market for a landlord to target.
The demand won’t go away unless all of the UK’s universities are suddenly shut down overnight – which is about as likely as Dagenham & Redbridge winning the Premier League!
If you invest in the right sort of areas, you are highly unlikely to encounter any periods where your property is uninhabited during term time.
Students also tend to be a little less discerning about where they live. That’s not to say that they will accept living in poorly-maintained, rat-infested dives, but they will probably be more forgiving of wear and tear than young professional or family tenants.
They might also be more willing to accept a property that hasn’t been finished to the highest possible standard. This could save you money on redecorating/refurbishment costs.
Student accommodation also allows you to be a bit more flexible when it comes to space. You can rent to students by the room – rather than the whole property – which means that a living room or dining room (which students might not have as much call for) could be converted into an extra bedroom, helping to further increase the amount of rental income you are drawing in.
Lastly, properties in prime student areas can be worth a fair old whack. So, if you ever come to selling on the property in the future, it’s likely that you will have made a profit on your initial investment.
The stereotype of rowdy students having parties at all hours of the day is overblown and unfair, but it does seem inevitable that letting to students will result in more wear and tear than if you were letting to professional tenants. Students won’t necessarily be the most house-proud, which is something that you need to bear in mind when you are weighing up whether or not to invest in this market or not.
If you’ve just bought a new, contemporary, beautifully furnished home, the student accommodation market may not be the market for you.
Void periods can also be a problem outside of term-time. While demand for student accommodation is always incredibly high, it is also intrinsically linked to the academic timetable (running from September to July).
Students get plenty of holiday at Christmas, Easter and during the summer, so there is a good chance that your property will be empty at these times of the year. Some students will choose to stay throughout the whole of term (and for the summer), but many will return home for weeks on end.
You could still rent out your home at these times – to tourists, business people or post-graduate students who will be studying throughout the year – but your pool of potential tenants will be drastically reduced. Another way round these void periods is to charge a holding fee for students who want to live in the same house for a second, third or even fourth year, but there are no guarantees on this.
Finally, issues with getting references and credit checks might be another possible deterrent to dipping your toes in the student market. Given the age of most students, they will be unlikely to get these things off their own backs. But this is where you can ask for a guarantor – nearly always a parent or very close relative – who will agree to pay rent on behalf of the tenant if the tenant themselves won’t or can’t.
If you don’t have any references or credit checks, it will leave you less protected if damage to the property or other disputes arise. Having a guarantor in place will help to give both your tenants and you peace of mind.
For more advice on student accommodation and the best places to invest in, please get in touch with Kings Group on 01707 872000. To find out how much rent you could be charging in the current marketplace, check out our free and instant online valuation tool.