Letting to students
I was talking to one of the waitresses in my local. She is so excited! She’s off to UNI. Just like hoards of other youngsters the next few weeks will see a change of lifestyle and their first experience of landlords. Letting to students can be a very lucrative business. It is also a very specialist lettings market. Get it right and you could achieve astonishing rental yields. Get it wrong and it will be a living nightmare. My warning to landlords who are looking at letting to students and who think that they will make easy money is that they need to be aware of the downsides not just the potential gross rental yields. Do your sums carefully and don’t forget to factor in the following:
The additional costs
Letting to students will bring you significant extra costs. Make sure you account for them in your lettings business plan. Set up costs will be much higher as you will have to furnish the property. There will also be additional items of furniture such as desks that you wouldn’t have to buy for professional tenants. Most professional tenants prefer unfurnished accommodation anyway. If you do use one of the many University Accommodation Offices you will have to comply with their accreditation conditions. There are obvious checks that you have to do as a landlord such as the gas safety certificate
However, there are additional checks that your student rental property will have to have for it to be accredited and then available to students to rent through the university’s accommodation office. You will almost certainly have to have all your electrical devices PAT tested ( a complete waste of time ) but expensive when done on an annual basis. As well as these adjustments to the fixtures and fittings there can be more expensive capital costs associated with letting to students. These include the installation of the likes of a fully mains wired smoke alarm, fire blankets and extinguishers and even a sprinkler system. All this adds and adds to the cost of letting which make the potentially eye watering potential gross yields not look quite so good when you have netted in these extra costs.
It seems great to have a captive market of eager student tenants in each of the university towns. Even better almost all universities will have their own accommodation office. However, before landlords get too excited you will have to tick a fair few bureaucratic boxes to get your rental property listed. Look at the University of York which I’m sure is not untypical. It’s code of best practice for landlords is a mere 48 pages long which you have to adhere to be part of the scheme.
The tenant turnover
I’m a fortunate landlord in that I have a stable of reliable longstanding tenants. Some of my tenants have been with me for over 8 years. If you are letting to students even postgraduate students you can kiss any stability of your tenant population good bye. Student tenant households regularly get together, fall out, reform, partners come and go all in the space of one academic year. There will be no shortage of drama! This means that you probably won’t have a complete up to date idea of who’s living in your rental property unless you make it your business to make regular visits. Because of this I would always advise landlords to let their property as a whole. If you do rent rooms separately, you will be forever advertising and re-letting your rooms with the associated costs and effort.
One of the downsides of high student turnover and renting to students is that this kind of footloose tenant will tend to try and leave all their rubbish behind when they move on. If you have a cellar, loft, be prepared to be constantly clearing them out at considerable time and expense. The way to avoid this is to take a meticulous inventory and ensure that you make your student tenants that you will deduct the costs of rubbish removal from their deposit if they don’t take their stuff with them.
Renting to students you have to be prepared with extra hassle. It doesn’t always follow though but be prepared. You can protect yourself by taking a rental guarantor. In this way you at least make pretty sure that you will get all your rent paid. However, having a rental guarantor will not prevent you from being subject to considerable hassle if things go wrong. The hassle in acting against the guarantor, the hassle in trying to withhold elements of the tenants rental deposit.
Weekly and monthly rental rates for properties rented to students can look extremely attractive. However, you do need to remember that the academic year isn’t 52 weeks long. Most students will return to University in September but then leave during June or early July. This potentially gives a student landlord 2 -3 months void unless they can negotiate a contract for a full 12 months. How successful a landlord is filling this void period will depend on the demand for student accommodation in their University town and how well they negotiate. Often there is a compromise to be struck where the incoming tenants or remaining student tenant pay a half rent during the Summer holiday period to secure the rental property.
The good news for landlord looking to rent to students is that the latest figures from Accommodation For Students is that student rents have risen again. This time the are up by 3.1% over the year. The average weekly rent now stands at £79.42. However, closer inspection of the figures show that the rises are not consistent across the country. Strong rental rises in southern towns and cities have masked falls in the north and midlands. In Luton rents have risen from £71 to £91 in 2013. Whilst in the midlands and the north some of the most popular University towns such as Manchester, Leeds, Sheffield and Nottingham have remained the same have fallen and still sit below the national average.
I’ve commented before that landlords who remain convinced that student rentals are a one way street with inexorably rising rents may be disappointed particular in the Midlands and the North. More competition from purpose built student accommodation and less students may in the near future lead to a glut of student accommodation and falling rents something that Property Hawk will continue to keep an eye on!
So landlords looking to rent to students continue to have a niche market to go at. But prospective student landlords need to be aware of some of the drawbacks before taking the plunge!
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