"Landlords can get nervous when renting to students, but they provide you with a solid stream of income year-on-year that should more than pay for the potentially higher maintenance costs"
- Jason Ferrando - easyMoney
Landlords wanting to make a healthy return from student accommodation investments should head up north, according to research from peer-to-peer lending platform easyMoney.
The analysis calculated the yields around the top 100 rated universities, using average prices and rents to build up a picture of where the strongest returns are.
The results found that areas around the University of Sunderland, Liverpool John Moores University and the University of Leeds offer the best returns in England, with the University of Aberdeen and the University of Dundee also proving very profitable north of the border.
How universities stack up vs the general market
Landlords can turn a better profit closer to Britain’s universities than not, as yields in postcodes home to a university stand at 5.4%, compared to 5.2% countrywide. However, many university postcodes offer far higher yields to investors.
Letting your property to a student can be seen as a risky endeavour, given the university lifestyle can result in more wear and tear.
However, the high demand and low void periods you get from a steady stream of students can more than make up for the risks.
High-yield universities - where investors should target
The University of Sunderland has the highest average yield, at 10.1%. Modest property values mean there’s a low barrier to entry in the city, with an average price of £79,830 versus a typical rent of £672.
The second most profitable area is around the University of Aberdeen in Scotland, with an average yield of 9.3%. The University of Dundee is also a good investment spot, at 8.8%. These are two very different markets however, with Aberdeen having a low average house price of £95,646, with Dundee costing far more, with a typical price of £170,695.
The third and fourth best locations surround Liverpool John Moores University, with a yield of 8.9%, and the University of Leeds, at 8.8%.
How Oxbridge stacks up
Yields are steady if unspectacular surrounding the UK’s big two universities.
At the University of Cambridge, yields are at 4.6%, slightly surpassing yields at the University of Oxford, where they stand at 4.0%. Average house prices stand at a similar level in both cities, at £526,599 in Cambridge and £525,542 in Oxford.
The one major difference is landlords in Cambridge benefit from higher rents, at £2,021, compared to £1,731.
London universities - a high barrier to investment
High house prices in London are a significant roadblock that majorly cut into landlord returns.
Around Imperial College London you’d have to shell out over £2 million to buy property. While renting is expensive in the area at £4,745 per month, that results in a yield of just 2.8%.
It’s a similar story around King’s College London and the London School of Economics, both of which offer returns of just 2.9%, so it seems investing in the capital isn’t very profitable at the moment.
Where else to avoid
The worst returns are near the University of Worcester, with yields of just 2.7%. In the area house prices of £340,835 compared to average rents of just £776. Considering that’s just £100 more than in Sunderland, and house prices are more than four times higher, you can see why investors should look elsewhere.
Other regions outside London investors should avoid are around Aberystwyth University in Wales, with yields of 3.1%, Ormskirk in Lancashire, near Edge Hill University, at 3.3%, and around Loughborough University, with yields of 3.6%.
Jason Ferrando, CEO of easyMoney says: “Landlords can get nervous when renting to students, but they provide you with a solid stream of income year-on-year that should more than pay for the potentially higher maintenance costs.
“The strongest yields are around universities in either the North of England or Scotland, where low house prices make it easy to turn a solid profit.
“This is particularly the case in Sunderland, where modest house prices should make it an attractive place for a first-time investor looking to start their portfolio.
“On the other hand it’s trickier around pricier areas in London, with their high house prices making it more worth your time to invest elsewhere.”
