UK buy to let landlords experiencing high returns on student accomodation
A typical studio flat in Exeter is worth £85,000 — up from its £65,000 purchase price — and it would receive £515 monthly rent from a student.
That is £6,180 annually before tax and lettings' agency fees, or the equivalent of more than nine per cent yield based on the original value of the studio.
This is a far higher return than is available on most property investments today. Yet it is typical of booming student rental income, according to a study by estate agent Knight Frank.
Would-be landlords should look to buy a small house suitable for modernisation, near a college, or with good transport links.
Reception rooms can be converted into bedrooms to let. Landlords might also have to register their property with the local council if they house large numbers of students — see landlordzone.co.uk for details.
New-build flats or houses are more expensive and usually smaller than second-hand homes, but rents are often higher, too.
John Heron, of Paragon Mortgages, which arranges mortgages for the student sector, says: 'Student property is appealing to landlords as they usually benefit from higher-than-average rental yields, as rooms tend to be let on an individual basis.
And there are generally lower arrears as tenancy agreements benefit from parental guarantees.' Knight Frank has compiled a league table of markets based on student numbers and demand for accommodation compared with supply.
It predicts an average five per cent rise on rents across the UK over the next 12 months — significantly higher than forecast rises for the mainstream lettings market.
'The winners will be prestigious universities amid a 'flight to quality', as students search for the best course for their fees,' says James Pullan, of Knight Frank.
But he warns that the quality of accommodation will have to rise. 'The new rules will engender the rise of the student-consumer. They will be paying a great deal to study and are likely to become much more discerning over housing,' he says.
Top-five university locations for would-be investors