Renting to students was traditionally seen as a no go area for many landlords. Students were often viewed by many landlords as a high-risk tenant with the potential to cause trouble. However, the steady growth in the student buy-to-let sector over recent years has many landlords reassessing this situation. Student numbers are at an all time high resulting in strong demand for rental properties in University towns and cities. A supply shortage has resulted in longer rental periods and high rental yields in many areas. With this in mind even the most cautious landlord is thinking twice about tapping the potential of student lettings.
The Student Lettings Market
According to the Higher Education Statistical Authority there are over 2 million students registered in the UK today and these numbers are rising. According to Universities and Colleges Admissions Services (UCAS), over 530,000 students were accepted into higher education programmes for the first time in 2015, an increase of 3.1% from the previous year. The National Union of Students/ UNIPOL survey on accommodation costs reports nearly 2 million students need rented accommodation. With over 60% of students unable to access halls of residence or purpose build student accommodation they are turning to private landlords to provide their student digs. On average students spend between on average £170 a week for privately provided accommodation. The average contract for privately provided student accommodation is 46 weeks. However, in areas where supply in scarce, many students are opting for longer contracts to secure accommodation for the next academic year. Knight Frank predicts rental growth for the student accommodation sector to be on average 3.68%, rising to 4.8% in Manchester and 8.1% in Southampton by the end of the year.
The last decade has seen a change in the typical student tenant. Gone are the days of the rowdy partygoer attending only the occasional lecture. With a hike in university and college fees students are no more focused on getting value for their money and gaining a good qualification. Students have become more discerning about their accommodation choices. With the increase in purpose built student accommodation they also now have higher expectations for the standard of their rented accommodation. Access to nightlife and on campus life is still important but so too are a quiet, comfortable and secure place to live. International and postgraduate students now demand professional levels of accommodation.
Student Letting Considerations
While the student letting market is certainly appealing not every buy-to-property is suitable for student letting. Landlords considering renting to students need to be aware of a number of considerations before taking the leap.
Location is the most important consideration. A student letting needs to be within 30 mins walking or cycling distance of their campus. Students also want to be close to student nightlife, local amenities and public transport.
Landlords need to be mindful that if they offer accommodation for 5 or more tenants that it will be classed as a house of multiple occupation (HMO). Landlords of HMO’s will need to be licensed by their local authority and need to comply with stringent regulations that can be costly to implement and maintain. A furnished house with three double bedrooms, two bathrooms and good communal areas is considered best for student letting. Furniture needs to be robust to withstand the wear and tear of multiple use. Fast broadband is now considered a standard requirement in student lettings. Universities and college accommodation offices usually have standards for approved rentals which are worth consulting.
As previously mentioned, often student tenants will be very focused on the cost of living and will find a “no-surprises”, all-inclusive deal very appealing. Not only is there a marketing benefit but it ensures any utility debts associated with the tenants don’t impact future residents of the property, avoiding issues associated with liability split across a group of people who were not previously familiar with each other. As a managed service this should include a margin to account for worst case scenario utility usage.
As it not always possible to reference students, although that doesn’t mean an attempt shouldn’t be made, it just means landlords should look for a guarantor for the tenancy from a parent or guardian. It will be possible to reference the guarantor in the same way as we would do any other tenant with the different levels of service available from MyNative. Also the guarantor will be responsible for fulfilling the rental agreement should the student fail to do so, you could argue that this gives a better level of protection that normal rental agreements, being secured against two individuals.
Full insurance gives landlords piece of mind, however, it is important to ensure the policy covers student letting. Some policy do not cover renting to student and if undeclared can nullify a claim.
Mainstreaming Student Lettings
Student letting is moving from being a niche corner of the private letting industry to become more mainstream. However renting to student still has its challenges and special considerations that landlords considering a move into the market must take on board. Is important research the market well. Landlords can benefit from the advice of a student letting agent specialist for details about locations with the highest potential for growth and rental yield.
Student lettings also need more in terms of management and maintenance due to the higher rate of turnover. However, with the right property in the right area landlords have a lot to gain from renting to students. If you are considering student letting or expanding your student buy-to-let portfolio get in touch with us. We can help with all aspects of your student buy-to-let from referencing, insurance and legal services.