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Thinking about investing in a student let?

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While the rest of the country is probably taking a holiday at this time of the year, the savvy buy to let landlord might be better spending their time preparing for the imminent start of the new academic year – and the hordes of students who will be looking for accommodation.

The student demand for accommodation

An article by Property Reporter on the 27th of June 2019, noted that this year has seen a record number of student enrolments at colleges and universities in the UK. 

Existing and potential landlords have responded quickly to the accompanying rise in demand for student accommodation by an increasing level of investment in suitable premises. 

Whereas during the last half of 2018, properties suitable for student accommodation remained advertised for sale for an average of 46 days (only 18% selling within 14 days and 38% within a month) in the first six months of this year, 52% of those properties were selling within two weeks and 61% within the first month – making an average selling time of just 32 days.

Rental yields on student accommodation

The increased appeal and increased competition among buy to let investors is one of simple economic sense. 

Not only is there a high demand from the growing numbers of students, but with each one likely to be looking to rent for a minimum of 12 months, the steady rental yields for landlords may be among the highest of all buy to let property. According to the website Money Wise, yields are some of the highest on buy to let property for students, making many of the UK’s university cities and towns investment hotspots for landlords.

There are regional differences, of course, as University Business (UB) pointed out in a guide published on the 23rd of July, when ranking some of the hotspots: 

  • top of the list came St Andrews in Scotland – where Prince William and his then future wife, Kate Middleton, both studied – with an estimated average yield on let student accommodation achieving a 12% annual yield; 
  • also occupying the top five hotspots were Birmingham, Loughborough and Lancaster; but 
  • in Britain’s most iconic university city of Oxford, the high capital cost of property meant that average annual returns showed a relatively poor 3.3%.

The student life

Despite the potential returns, landlords might be nervous about letting to students because of the reputation gained by some of them for a rowdy and partying lifestyle at all times of the day and night.

Since they are also likely to be at an age when their adult character and personality is still developing, a previously sober and responsible attitude at the outset is transformed into one that is less responsible. That may pose particular challenges when it comes to your selection and vetting of prospective tenants, of course.

Furthermore, whatever your success in selecting suitable tenants through careful reference-checking, you might need to expect rather more wear and tear to your property than when letting to others.

Since there might even be instances of malicious damage to your property by ill-chosen tenants or their friends, you may also want to take the precaution of ensuring that the landlord insurance you choose incorporates such cover as standard – some such as ours here at UKinsuranceNET.

On that same question of landlord insurance cover, make certain that your policy covers any type of tenant, including students – just as ours do – since some specifically exclude certain categories of tenant such as students, the unemployed, those on welfare benefits, or asylum seekers.

When your tenants are students, you might also want to pay particular attention to the level of landlord liability indemnity incorporated into your landlord insurance policy. Ours, for example, provide as much as £5 million of landlord liability indemnity insurance as standard.

The law

While common law imposes on you a duty of care towards the health and safety of your tenants, there is also a growing raft of statutory legislation binding landlords and tenants and several aspects are especially pertinent when your tenants are students. 

The official government website outlines the many obligations and duties demanded of a landlord of any type of let property occupied by any kind of tenant.

If your tenants are predominantly students, the premises you let may be officially classified as a House in Multiple Occupation (HMO) – if there are at least three people living there as more than one household and they share such essential facilities as a bathroom or toilet and kitchen. 

In the case of an HMO, legislation with respect to landlords’ duties and obligations is stricter and reflects the particular conditions, risks and perils that may be encountered when multiple households are sharing the same accommodation – such as students who are house-sharing, occupying their own separate rooms, but have common access to bathrooms, toilets, kitchens and living rooms.

An article in our Knowledge Base on the 25th of September 2018 described the various pieces of legislation, rules and regulations for landlords of any let property, noting areas in which the law continues to regulate buy to let businesses, including tougher rules for minimum room sizes in HMOs and widening the net of those that must be licensed for use by the local authority.

If an HMO is occupied by five individuals or more, for example, a local authority licence is obligatory – although local councils also have the authority to require HMOs of any size to be licensed.

Licensing is designed to ensure that health, safety and the general condition of any HMO are maintained to an adequate standard. In their enforcement role, local authorities have the powers to inspect any HMO within five years of your initial application for a licence – and if your property fails to come up to scratch, you must make whatever improvements are necessary to satisfy the council’s Housing Health and Safety Rating System (HHSRS) risk assessment.

If you the landlord of a licensed HMO, you must tell the local council if the circumstances of any tenant change (they are expecting a baby, for instance), or if you or any tenant plans to change the layout of space within the HMO.

Only “fit and proper” persons – those free of criminal convictions or breaches of housing regulations – may qualify as the landlord of a licensed HMO.