For investors and landlords, student accommodation is seen as a pretty safe bet. You’re guaranteed a regular stream of rental income, it’s fairly low-risk and it can potentially be very lucrative if you buy in the right areas.
As well as this, the student population refreshes at the start of every academic year, which means you will always have a large pool of potential tenants to choose from. The majority of students will need somewhere to live while studying, so demand is very resilient.
It’s not all rosy, though. There are some downsides to renting your property to students, some risk factors that need to be taken into consideration. Below, using our experience as one of Wellingborough’s leading estate agents, we outline the main pros and cons of this increasingly popular choice of investment.
Demand will nearly always be high. If your property is in a big university town or city, or near to one, then there shouldn’t be many issues with getting tenants in place. Wellingborough isn’t far from Leicester, Coventry, Northampton and Bedford, all of which have thriving student populations.
From a financial perspective, your investment should be a secure one. Rental income will be consistent and regular. Plus, with demand hugely outstripping supply in this market, void periods are highly unlikely during term time.
Another advantage of targeting the student demographic is the fact that they tend to be less fussy about where they live. Students are becoming more discerning about their digs, and they won’t appreciate properties that are falling apart at the seams, but they are likely to be a little bit more forgiving when it comes to wear and tear.
Furthermore, the fact that student accommodation allows you to let each bedroom individually, rather than letting the property as a whole, means you could secure a higher profit margin from your investment. You can also be inventive and innovative with space. Students are unlikely to have as much need for a traditional dining room as other demographics, so this could be turned into another bedroom, further upping your rental income.
The rowdy student stereotype is well-known, albeit often exaggerated. As a result, wear and tear seems likely to be more common in a student property than one inhabited by professional tenants. The days of students living in total squalor might be numbered, but on the other hand they won’t necessarily be the most house-proud. If you’ve purchased a modern, beautifully furnished, high-end home, this demographic might not be for you.
Another potential disadvantage is void periods. They might be very easy to avoid during term-time, but they’re much harder to avoid out of it. Demand for student property is, of course, directly linked to the university timetable, to the academic calendar running from around September through to June. Most students get plenty of time off over the summer, so there is a good chance your property will be empty for 3-4 months of the year. This, in turn, will mean you’re paying out more money – thanks to mortgage repayments and other costs – than you’re bringing in.
While a holding fee can be charged, for students who want to live in the same house for a second, third or even fourth year, there are no guarantees over this. There is nothing stopping you renting out your home in the off months, but once all the students have gone home for the summer you might find your pool of potential tenants has reduced.
Landlords should also consider the difficulty of getting references and credit checks from students, given the age of most of them. If you can’t get these things, it will leave you less covered if damage or other issues arise (something that is not unusual in student accommodation). In these cases, it’s worth asking for a guarantor – often a parent or close relative – who agrees to pay the rent if the tenant doesn’t (or can’t). This will give both you and your tenants’ peace of mind.
One last thing to bear in mind is stability, or rather the lack of it. By its very nature, student accommodation is a short-term fix. Undergraduates move away from home to study, live in the city where they’re studying for a few years, and then move back home again; long-term when it comes to student accommodation means three, max four years.
Consequently, landlords/investors are unlikely to make huge returns on their investment – student accommodation is all about the here and now, rather than the future. That said, house prices are rising across the country and show no signs of slowing, so even houses that have been used for student purposes could still fetch some decent capital gains.
For more information about student accommodation and letting your property to this demographic, please get in touch with Hawksbys on 01933 224 444.
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