The first step in becoming a student property landlord is deciding to invest in this form of real estate; however, once you’ve made that choice, you’ll discover a huge variety of property types within this sector. Here’s a brief guide on the different types of student property investments available in the UK you might consider.
The property type you’re probably most familiar with are houses in multiple occupations (HMOs), which is essentially a house that is let out to more than three individuals who are not related with one another.
They have separate bedrooms, but tenants will share a bathroom and kitchen, and if you’ve been a student at a university in the UK, you’ve probably lived – or known people who lived – in properties like these before.
Landlords find HMOs a profitable investment, as it means they can earn a number of tenants’ rents every month, which is likely to cover the mortgage with a lot left over. Purchasing properties to let out to individual tenants would mean you would only gain a single rent, so many property investors may be tempted by HMOs for this reason alone.
However, there are also downsides to purchasing this type of student property; for a start, you have to find enough tenants to fill it, which could restrict your target market. This might not be too difficult if it has three or four rooms, as students tend to look for homes within their friendship groups. If it has ten bedrooms though, it can be a big challenge to find a group of ten friends looking to live together who are all interested in your asset.
There are also a lot more maintenance responsibilities when looking after a HMO, as you might have to resolve any grievances, make repairs and fix any problems yourself if you don’t have the assistance of a letting agent. The more rooms the property has, the greater chance you’ll be regularly contacted for help.
Investing in a student apartment is another common option, as these are growing in popularity among university goers in the UK. These typically are self-contained flats that have an individual kitchenette, en-suite and living/study area, as well as a bedroom. They are compact and house one to two students, so this will determine your rental income.
Of course, even if your rental income might be lower than with a HMO, your mortgage costs are likely to be significantly less than with larger houses, so your yield is typically the highest among student property types.
Indeed, you can find student apartments that offer yields of 9% – far higher than the average rental yield for general buy-to-let properties, which LSL Property Services reported was 5.3% in April 2013.
Student apartments are considered to be a good investment, as landlords are typically able to let these out to both students and professionals, as they appeal to both groups of people. Furthermore, as they count as a property in their own right, they have the potential to be sold on to all homebuyers in the future.
This type of property also particularly appeals to international students, as they offer the opportunity to have individual private space while still living in a sociable building where every other resident is also a student. They typically have communal areas such as a gym and/or study area, giving international students excellent opportunities to make new friends, which is important when they’re living in a new country.
An alternative to student apartments is student pods, which differ from the former by being a one-bedroom facility, while the kitchen, bathroom and living areas are all shared in the main building. While these tend to be popular among students – particularly those in first-year who don’t have a good group of friends they can move in with yet – they are also restrictive when it comes to reselling.
This is because they are designed solely for students, so whoever you sell it on to will have to let it out to students as well. As you don’t know whether student property trends will change over the years, or whether the area will remain one of the most popular among students, this can limit the potential of your property investment.
Natasha Al-Atassi is passionate about property, she handles a number of her own investments as well as writing on a regular basis for Vita Student Buy to Let.