Student tenants often get a bad reputation when it comes to renting accommodation. However, the vast majority of students are very good tenants, and choosing to operate within the student housing market is often a positive move for landlords. There are many benefits associated with letting to students such as better demand, higher rents and less risk.
Strong Demand
In 2017/18 there were 2.34 million students studying in the UK, this figure is now higher with growing numbers of both home and international students. These students require accommodation which is in short supply in most university cities across the UK.
These favourable conditions can make it very easy to find tenants for student properties. Especially in locations close to university campuses, it is often these areas with a high concentration of students. The letting process also goes on for longer, students often look for accommodation from November through to September. This gives student landlords a big window to find suitable tenants for their properties. This makes void periods more unlikely.
Higher Returns
As there are usually more tenants per property and that you are renting by the room, letting to students will often produce higher returns that of other tenants. Student housing offers the highest yields of all rental sectors. A well managed HMO could achieve a rental yield approaching 20%.
Low Tenant Default
Most rent payments will be partially funded by student loans so the risk of a default will be low. Students will often seek contributions from parents if they are short on rent payments and parents will often act as a guarantor to ensure rent is paid. This guarantees income over the period of the lease.
If the property is let under one tenancy – e.g to a group of friends – they are jointly and severally liable. This means that if one tenant falls behind on payments, all other tenants are obliged to make up the difference.
Lower Risk
A larger number of tenants will mitigate the risk associated with the property. Even if a tenant was to default, there will still be income from the other tenants. Also renting by the room will also increase the chances of tenants being in the property, partially filling the house is better than it standing empty for a long period of time. Lower income levels are better than no income at all and will help cover the costs of the property.
If renting to a family, there will likely be long periods when the property is vacant, however with greater numbers of student tenants there will likely be someone in the property at all times, this will deter thieves and other nuisances.
All bills inclusive rents are becoming increasingly popular, this is of benefit to landlords, as not only is it more appealing to tenants and makes the property more competitive, but it ensures that they will not be liable for any utility bills during the term of the contract.
Tenancy Length
Student tenancies often run between 42-52 weeks, which can be a benefit to landlords. If the student decides to move out they are still responsible for the rent payment. Income is guaranteed for the duration of the agreement. There is also regular opportunity to review the rent, and respond to the changing market to keep your property competitive.
Students will often move out once the academic year has ended, so there will likely be plentiful time to complete renovations, redecorations or cleaning when the property is vacant. This will reduce both time and cost of the works, and also mean no tenants are disturbed during the process. Many landlords also charge a retainer for the summer months, the property will be vacant however still producing income, maximising the investment.
Conclusion
Renting to students can provide landlords with a better return on investment, more flexibility, and lower risk. With students moving more towards affordable accommodation, properties offered by student landlords will likely only grow in popularity. There may be more wear and tear and a little extra time spent managing the property, but students can be very good tenants and should offer better financial returns from your property.
References
Buying and Selling a House. 2017. Accessed 12th November, 2019, from http://buyingandsellingahouse.co.uk/buy-let-property-choosing-managing-student-lets-landlords-responsibilities
Home Protect. 2018. Accessed 12th November, 2019, from https://www.homeprotect.co.uk/landlord-insurance/students-tenants#:~:targetText=Older%20properties%20with%20multiple%20rooms,you%20can%20expect%20high%20returns.
Easy Property. Accessed 12th November, 2019, from https://easyproperty.com/landlords-why-you-should-let-to-students/
