Renting to students – A more rewarding investment than you may have first thought
Binge drinking, hatred of hoovering and incapability of managing their money – your typical reputation for any slothful student. But, do they really pose a bigger threat than reward when it comes to renting out a property?
According to a recent YouGov survey, 40% of respondents said they would not want to rent their property to students. But, maybe it is unfair to tarnish them all with the same brush?
Student life is a raucous culture, although it is important to understand the one thing that students depend on – money. To secure a student property, an initial deposit is required, a monetary value they aim to protect and defend for the course of their tenancy as they need as much of that money back at the end of the year. Ensuring the property is kept in good condition, the majority of students go above and beyond to secure the repayment of their deposit.
An important factor to consider is that investing in student property can be extremely profitable, especially in the case of overseas students, and landlords could be missing an opportunity by dismissing the student lettings market before they’ve tried it.
According to the UK Council for International Affairs, 19% of all students studying in the UK in 2014/15 were international. In this instance, the general consensus amongst landlords are that they want to have a UK based guarantor, as it would be easier for them to seek legal action if necessary. However, international students often have to fork out for a lump sum of six months’ rent in advance to secure their accommodation. Landlords hold a considerable proportion of their annual rental income upfront, proving fear of rent arrears would not present itself as an issue.
James Davis, chief executive of the online estate agency Upad, suggests from a landlord’s perspective that students present a lucrative opportunity, “Despite popular belief, they are the most reliable tenants as they often have their rent subsided by student loans or with parents as guarantors.”
Students that come to the UK to study often pay double the annual tuition fee that British students pay and quite often have outstanding money to rent a premium student property. Property developers are aware of the advantages of tenanting property to international students and have targeted developments specifically aimed at this market. RWinvest, a property investment company based in Liverpool offer a wealth of student development opportunities providing potential investors with rental returns of up to 8%.
Nick Marr, co-founder of TheHouseShop.com, states:
“The niche market for high-end, luxury rental accommodation, targeted specifically at international students, is booming, and there are very few other sectors where you can find the same levels of consistent demand and high yields. These types of properties tend to appeal to students from the Middle East, the US and Africa, who will happily spend more than £2,000 a week for a rental property during their studies”.
Nevertheless, renting to students from the UK can be equally as prosperous. Properties located near popular universities are in increasingly high demand as the incessant figures of students fuel the rental market. Landlords can be fortunate from capitalising on high demand and increased rents, alternatively, keeping monthly rents to a minimum assures a consistent flow of students with lower void periods.
Student Money Survey 2015, found the average cost of student rents across the UK amounted to £373 per month, per student. On the other hand, in the capital city of London, students spend significantly more at an average of £477 a month. One advantage to student housing is that houses of multiple occupancy (HMO) presents a property that can be rented out per room. Landlords ultimately, can charge a little more than the overall price of the property per tenant and result in earning more than the equivalent let to a family or young couple renting the property as a whole.
Photograph by Falco