Buy-to-let investors can make healthy yields from renting to students, but many are still reluctant to open up their properties to the “hard-partying” tenant type.
University towns are a great starting point for any property investor, even those not looking to rent to students, as you are likely to find a healthy supply of graduates and young professionals in the area looking for good quality lettings after finishing university.
For those landlords who are willing to let to students, a new league table published by Simple Landlords this week looking specifically at which universities are associated with the highest yields for student properties has named Durham, Warwick and Manchester as the top three spots for this type of investment.
What are the benefits?
The average annual return for a landlord owning student property in Durham is 11.5% per year, according to the results, followed by 10.25% for Warwick and 8.48% for Manchester. By contrast, Oxford languished at the bottom of the top 20 with average annual yields of just 2.78%, despite the university itself ranking number two after Cambridge.
Regardless of the high returns that can be achieved with student lets, many landlords would still prefer to steer clear of this tenant type due to the perceived risks involved, with Simple Landlords concluding that only around a fifth of landlords are prepared to rent to students.
Some of the benefits of letting to students, according to the insurance company, aside from the potential for higher yields, include the strong levels of supply as student numbers increase, the decreased risk of arrears compared to other tenant types as students tend to secure financing before going to university, and the ease of marketing as students will sign up for a full academic year.
Debunking the myths
Tom Cooper, director of underwriting at Simple Landlords Insurance, said: “There are some great investment opportunities for the minority of landlords who are prepared to rent to the student market. And it’s not as risky a move as you might think.
“Often students don’t deserve their bad reputation. With university fees today’s students take their studies much more seriously, and many also work to see themselves through the semester. It’s not quite the hard-partying picture many have of student life.”
For those who remain unconvinced, choosing an area with strong student demand and high student property yields can still be a great strategy for landlords and buy-to-let investors looking to tap into the market of young professionals and renters who are often attracted to such locations.