Investing in Buy-to-Let Properties in University Towns: A Strategic Guide

If you’re considering becoming a landlord, there are certain elements to consider, but renting out a university accommodation property could be not only a decent income, but a steady one. Whilst there has been a drop in older students applying to university, the number of 18 year olds has remained consistent, and depending on which university town you choose, your property could be a great investment.

Why would I buy to let to university students?

One of the main reasons people purchase a buy to let property for university students is because their own child is becoming a student. In this case, you’ve probably already done a lot of the research – you’ll know about the area, how much housing might cost and how big the university is. Often these properties are bought by parents, as they feel like can trust their child to take care of the property whilst at university, and choose appropriate housemates. 

Perhaps you already live in a student town, or were a student at that university, seeing the potential for a buy to let property.

Depending on the area you choose, there are a great deal of affordable properties – you might not be willing to live in an older house in a certain area, but there are plenty of students who would.
The university town you choose is likely to remain so for a long time – as such, you’re looking at a consistent investment. If you pick well, not only will the value of your property increase, but you’ll always have tenants, year in, year out.

Where should I buy?

There are a range of factors to take into account when choosing where to buy your buy to let student property:

-    The size of the student population
-    The average rental cost
-    The possible increase in value of the property
-    How affordable the property is
-    Location (near campus/shops/clubs)
-    Size of the property – will it house 3-5 students?

Studies of 65 university towns across the UK showed that over the three years it would take to complete a bachelors degree, properties had increased by an average of 22.5%. The top three university towns for the highest increase in property value were Bedfordshire (42%), Uxbridge (30%) and Bath (29%). However, when considering the properties in university towns that were most affordable and offered good revenue, Durham came first, followed by Dundee and Queen Mary’s, Belfast. Depending on whether you’re looking for a foot on the ladder in the buy to let world, or a more hefty investment, there are good signs that owning buy to let student properties will allow you to pay off a mortgage every month whilst the property will continue to increase in value.

How do I do it?

Once you’ve assessed your finances and considered which area you want to buy property in, look around. Bear in mind some of our tips below. This does not have to be a property you would want to live in. But also consider whether you would be happy to have your kids living there. If It’s a little run down, but functional, clean and in a good area, it’s worth considering. Also remember that often first year university students aren’t allowed their cars on campus, and many of them may want a home with parking in the second or third years. 
When you’ve found a property you think will make a good buy to let, and is at the price you want, get it surveyed. Finding mould, Japanese knotweed or damp may change your mind. This is still an investment, after all.

Find a buy to let mortgage that suits you – look around and do your research.
It is likely that your student property will be consider a House of Multiple Occupancy (HMO) as such you’ll need insurance and may need to register the property. As part of this, you’ll have to adhere to certain rules – ensuring each room has a fire alarm, carrying out a gas safety check every year, and having the electrics tested every 5 years. 

What are the disadvantages?

• As mentioned, it is unclear whether the numbers of university goers will decrease over the years. If the number of students is lower, there’s a smaller amount of need for your property. You may have to do some renovations to turn it into a family/other home down the line, or be willing to sell it on.
• Stereotypically, students aren’t known for being the tidiest people. These are young people learning to live on their own for the first time. However, for campus universities, most students have already lived on their own for year, and can look after themselves. Price your deposit accordingly, based on the condition of the property and how many people will be renting it at once.
• The changes to 5% stamp duty on all second properties, even those under £125,000, means you will have to pay more upfront. Make sure you have this cash available.
• Unless you are in the town you’re buying in, you will have to ensure an estate agent looks after the property for you. Consider how much you’re willing to pay for this service, compared to the income from your rent.
• Councils in certain areas are locking down on the creation of large rental housing, meaning you’ll be in competition with landlords. Manchester is one of these, but you can get around this by buying a two up, two down terrace, or an ex-local authority property, which are not covered under the scheme.
• As many students go home for the summer, your property may be empty for a couple of months each year. Ensuring a year long lease at least means that you will still receive rent during this time.

Top Tips and Tricks

• Pick a town with two universities – you’re upping your student number and making your property even more needed.
• The highest rated university doesn’t necessarily mean it’s the best place to buy a property. For example, Oxford may be one of the best universities in the country, but usually undergraduates stay on campus, thus eliminating the need for private landlords.
• Do your research on the university – some will have an approved landlords/estate agents list. Others may be investing money into their own accommodation in the coming years.
• Students usually live in groups of 3-5, so ensure the property has enough bedrooms and bathrooms. 
• Think functional! Offering items your student tenants will probably not have will make your property more appealing (sofa, beds, washing machine). The advantage is, these items can be second hand. You do not have to spend a lot of money doing up your property, and as long as essentials (heating, electrics) work, you will have very little upkeep.
• Ensure your tenants sign a joint lease, meaning that if one of them defaults their payment, the others need to pay up. This is preferable to having an individual agreement with each tenant. Choose an estate agent that knows buy to let properties well, and is confident they can pitch your property to the right students, and ensure it is well looked after.

The Student Renter

It’s easy to lump students into one market, but there’s variety. Young, UK students will be looking for somewhere cheap, in the area they want (near town/campus/bars/shops) that has enough bedrooms for everyone. Often they are not too bothered about the place being decorated well. There’ll be a few scuff marks along the way anyway. But what about international students? Those travelling from afar often expect a higher standard of property and are willing to pay. You could also consider post graduate students – being a little older, they will probably not want to be in the city centre, they are dedicated enough to return to studying, so they may want to be near the campus or library, and may expect a slightly higher standard of property than the undergraduates (but won’t have the funds of the international students). Consider what your property has to offer, how much you want from it, and move from there.