"Preparation and communication is vital. If you're going to invest in the student market you've got to be prepared to put the work in"
John Warburton, Director of Belvoir Leamington Spa, had this to say: “Providing properties for students can be profitable and rewarding but it's important to do your research carefully and fully understand the market before investing. There are a number of fundamental differences between letting to students and non-students so it's vital that you are aware of the potential benefits and possible challenges before you commit.
One of the key benefits of investing in student lets, of course, is that you will get a high yield, generally of between 7 and 11%.
This is because more individuals will be paying rent within the property, plus some student landlords choose to convert living spaces into additional accommodation in order to maximise this potential.
You must, however, be aware of Article 4 Direction and know whether this applies in your area. As from April 2012 some Councils require planning for change of use if you are converting, for example, a three-bed into a four-bed property.
The number of people responsible for the payment of rent is also a benefit as you won't be relying on a specific individual. At Belvoir Leamington Spa we place the students on a joint tenancy agreement so that they are all responsible, plus guarantors are put in place.”
Nicole Bentley, Belvoir Leamington Spa's Student Manager, explains further: “The guarantors are jointly and severally liable and have to adhere to the terms and conditions of the tenancy agreement too.
As students don't usually have an income they can't be credit checked and therefore we insist on them having a guarantor who needs to earn in excess of £15k a year.
The guarantor can be any family member or a close family friend but is usually a parent. They must be willing to put their name against the tenancy agreement and are signing to say that if the tenant fails to pay the rent they will be responsible on their behalf.”
John adds: “Having these guidelines in place is extremely important and in the 18 years that we have been letting to students we've never had a serious problem with payments.”
Hot property
So, what type of properties are ideal investments for the student market?
“If you have a university close by then most properties will make great students lets,” says John.
It doesn't matter whether it's a one, two, three or four-bed, all types of properties are in demand. Larger properties are likely to command higher yields, of course, but make sure you understand HMO and licensing obligations before committing.”
Nicole adds: “A cross-section of investments will appeal to this market as not all students will be looking for the same type of property. Some will want basic accommodation while others won't have a budget ceiling and will be happy to pay for luxury.
Importantly, however, most students will want to be within walking distance of the university buildings or near good transport links. They will be looking for sufficient local amenities too, including shops, restaurants and nightlife. Town centre properties, therefore, tend to be the most popular.”
University challenges
“While most student lets run smoothly there are a few potential challenges to be aware of,” says Nicole.
For many students this will be their first experience of being away from home and the first time they have taken responsibility for a property and therefore they are likely to need some extra support.
They will suddenly be stepping into the next level of life, taking on bills, cleaning and living with others. We like to work very closely with them and make sure we are available to help and advise. Clear communication and ensuring regular inspections are carried out is also key. The tenants that we work with, plus their guarantors, have very high expectations and will want the property to be a very good standard and condition on arrival.
Unfortunately, however, some students don't have the same high expectations when they are handing the property back at the end of the tenancy and as a result you may be faced with additional wear and tear and cleaning.
Contracts generally run for 11 months so a student landlord or their agent only has one month to turn the property around for the next set of incoming students. This includes checking out the outgoing tenants, getting any maintenance assessed and executed, plus having the property professionally cleaned. We also produce a video inventory to present to the incoming tenants, plus get together the keys and welcome packs.
We have a very high standard in our property preparation and therefore we have a lot of work to do in a short timeframe for the 100+ student properties that we currently manage.”
Steps to success
John advised: “In order to help make your student let a success there are a couple of things you can do,”
Preparation and communication is vital. If you're going to invest in the student market you've got to be prepared to put the work in, both with the students and the property itself, particularly in the month when it's empty and you are likely to updating and upgrading at speed.
Make sure you offer a property that is well presented and in a good condition. Don't think that just because they're students they will be happy with sub-standard accommodation – they won't. In fact, I believe that the level of presentation offered will dictate the type of tenant you will attract and if your property is a very good standard it is likely to be treated better.”
Nicole adds: “another good tip is to have students and their needs in mind when you are investing, developing or adding to your property. This could be providing an additional bathroom which isn't en-suite so visitors don't need to enter a bedroom to use the facilities, or perhaps creating a communal area or a user-friendly outside space. Understand the market, listen to their needs and adapt your investment plans accordingly.
Create a rapport with them… work with them, help them and ensure you provide value for money,” she concludes. “To be successful in this market it's essential that you treat the students fairly and always give them the same level of consideration and respect as you would any other tenant.”
