TEN reasons why renting to students is a good idea
It is a great time to be a student landlord. Following a slight decline in the number of university applications from UK students, UK applications rose for the first time in three years in early 2019, with the rise being attributed to Brexit uncertainty. In this blog, one of the NRLA's partner insurers Hamilton Fraser explain why renting to students is something landlords should consider.
The UK is regarded as a world leader in higher education - the number of international students applying to UK universities has doubled over the last 20 years and Britain is now the second most popular country in the world for international students.
Yet despite the buoyant nature of the student rental market, some landlords remain cautious about renting to students. Stereotypes of noisy student tenants causing damage to property and struggling to pay the rent abound. But are they justified?
Our 10 reasons why you should consider renting to students may provide you with some food for thought if you are in two minds about renting to students.
- The student rental cycle is regular and predictable
Student tenants tend to find their accommodation for the following year towards the end of term. They usually vacate their existing property over the summer, moving into their new home at the start of the academic year in September. While it does mean
that student landlords may have to find new tenants each year, the predictable cycle of the academic year provides landlords with an element of security.
Student landlords can agree tenancies and move out dates in advance and prepare their property over the summer. This makes it easier for landlords to plan ahead and ensure that they get the property back on the market in time for the next academic year. There is generally a high level of demand for student accommodation, so a student buy to let is likely to be easy to fill so long as it is well maintained.
- The student rental market is thriving
Although there was a slight drop in applications following the 2012 rise in tuition fees, the student rental market is now thriving. UK student applications are up and, as we have already noted, the number of applications from international students is also increasing. For now at least there is no indication of any regulatory change that is likely to negatively impact the number of students heading to university.
- Students are a low financial risk
Despite the stereotype of students being unreliable when it comes to paying the rent, they are actually usually a low financial risk. Most students provide their parents as guarantors and rent payments are often subsidised by student loans.
- Students have high rental yields
Last year, student properties were named the best for rental yields in the UK. In today’s private rented sector, with increasing regulation and a reduction in the tax benefits on offer for landlords, the high rental yields associated with letting to students adds to the appeal of the student rental market.
- Shared accommodation and houses in multiple accommodation (HMOs) are profitable
Sharing accommodation with friends and fellow students is a key feature of student life. Student landlords therefore tend to focus on HMOs and shared accommodation when it comes to student by to let investments. This makes sense both for tenants and also for landlords, who can charge more per room, making HMOs a lucrative investment. If you do own an HMO don’t forget that you will need to obtain a landlord licence.
- Today’s students are more sensible when it comes to alcohol consumption
The changing attitude of young people towards alcohol, away from drinking to excess, means student tenants are less likely to be careless about security, cause damage to the property or aggravate problems with the neighbours. In one study, a third of 16 to 24-year-olds in 2015 said they didn’t drink, compared with one fifth for the same age range in 2005. When it comes to students, less than one in five students say they get drunk more than once a week.
- Wealthy international students offer high potential profits
As we have already mentioned, the UK is a popular destination for wealthy international students, who are in a position to pay the high fees required to study in the UK. For example, an undergraduate medical degree can cost up to £58,000 per year for international students. Those who are able to afford to study in the UK are likely to be wealthy, sometimes even paying their entire year’s rent up front. They will however also expect to access higher quality accommodation than their UK counterparts.
For landlords considering targeting the international student market, it is worth researching how best to market to them in your specific area – for example, some universities help international students to find their accommodation and certain cities that are popular with international students will have businesses that specialise in this field.
- UK student expectations are manageable
Unlike young professionals and middle-aged renters, who expect more for their money these days than ever before, most UK students do not expect top of the range fittings and furnishings. They simply want modern, low-maintenance accommodation that is close to their university and local amenities.
- Student deposit returns are usually turned around quickly
For students, who are usually on a tight budget, having ready access to large sums of cash for down payments such as deposits can be a challenge. Kate Mutter-Bowen, Head of Tenancy Deposit Protection at mydeposits, points out that they often find a way around this which is to the landlord’s benefit. She says:
“Most students cope with this by transferring the money from their previous deposit into their upcoming one. For landlords, this is an added bonus. Students who need to access their deposits quickly in order to secure next year’s tenancy are less likely to cause damage and more likely to protect as much of their deposit as possible.”
- The short-term nature of student lets is more flexible
We have touched on the predictable rental cycles of student tenancies, which usually start around September and end around May / June. The flexible nature of this annual rhythm offers landlords the opportunity to carry out any maintenance on the property, review rents or sell up if they so wish.
Top tip from Steve Barnes, Associate Director, NRLA Property Insurance
“Remember, if your property is empty for an extended period at the end of the academic year, make sure you follow the terms and conditions of your insurance policy so that you are adequately covered.”
Clearly, the student rental market offers some great opportunities for landlords who are looking to benefit from high yields, reliable tenants and the predictable nature of the student lifecycle. If you were in two minds about renting to students, perhaps it is time to reconsider.
