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Renting to students: top tips for buy-to-let landlords

Renting to students: top tips for buy-to-let landlords

Top tips for buy-to-let landlords

Student rentals typically offer one of the highest yielding opportunities for buy-to-let landlords, earning an average rental return of 6.5%1 each year for those who get it right. From property licencing to regular inspections, student landlords need to be well-educated if they want to get top marks.

Location

Make sure the property is in a good location.

Not only will landlords want to choose a town or city with a burgeoning student population, they also need to make sure their property is in one of the key student hotspots.

Out-of-area investors are well-advised to visit their target location to identify the areas of maximum student demand. Typically, these tend to be close to college and entertainment venues and landlords can trip up if they don’t understand the subtle nuances that elevate one street over another.

Property must-haves

Provided the property is in an attractive location, the achievable rent will depend to a large extent on the facilities on offer.

Students nowadays like shiny bathrooms and kitchens, open plan kitchen-diners, double beds and, if possible, ensuite bathrooms and outside space.

If a property doesn’t have these features, it’s not to say that it won’t rent but the landlord may need to adjust their expectations on income.

Property licencing

Landlords should always get in touch with their local council to find out if special licencing is required.

Student properties are usually houses in multiple occupation (HMOs) – homes rented to at least three people comprising two or more households who share facilities like the bathroom and kitchen.

From 1 October 2018, the government will require all local councils to operate mandatory licencing for HMOs with five or more tenants. These new regulations will also bring in minimum bedroom sizes and require landlords to adhere to council refuse schemes.

Many councils also operate additional and selective licencing schemes which bring student rentals into their jurisdiction.

Marketing

Landlords can go it alone with their marketing but it may help to join a student housing affiliation scheme to maximise demand.

For example, student housing charity Unipol provides help and assistance to students renting in the private sector in Leeds, Nottingham and Bradford. Using the Unipol scheme, marketing to students starts in January for tenancies that will begin in September.

To be included in an affiliation scheme, landlords may also need to gain accreditation and demonstrate they follow best practice in student housing.

Using a letting agent

In each market, there are usually a handful of letting agents that have in-depth experience of the student market and it can pay dividends to tap into their specialist knowledge.

Landlords should look for an agent qualified with either the Association of Residential Letting Agents (ARLA), the National Association of Estate Agents (NAEA) or a member of the Royal Institute of Chartered Surveyors (RICS) to make sure they get good advice.

As usual, landlords will need to decide whether to go for a ‘find only’ service or to add ‘ongoing management’ on top.

Tenant checks

Landlords will want to run a range of tenant checks before letting their property.

These include an ID check and a ‘right to stay in the UK and rent’ check, evidence of each tenant’s financial circumstances, references and guarantor information.

The ‘right to rent’ check became mandatory for landlords throughout England on 1 February 2016 and is especially important for landlords when dealing with overseas students.

Tenancy agreement

Student properties can be let under a joint tenancy or a series of individual tenancies (single room lets) and typically have either a 48 or 52 week duration.

A joint tenancy means all tenants are jointly liable for any rent arrears or damage to the property. So, for example, if one tenant moves out, the landlord can pursue the remaining tenants (as well as the tenant who has left) for any monies due.

In many cases, student landlords also ask for a guarantor, typically a parent who will step in to pay the rent if the student doesn’t.

Landlord insurance

Insurance is something all landlords should consider and landlords with mortgaged properties will need to have suitable insurance to satisfy their lender.

Regular home insurance policies don’t provide all the cover landlords need and specialist residential landlord policies are therefore required.

Focused policies are available for landlords letting to students but landlords should remember these won’t cover students’ possessions and remind tenants to arrange their own cover if they want protection.

Regular inspections and trouble-shooting

Many agents recommend an inspection each term to make sure everything is in order.

It’s important to keep an eye on the condition of the property and deal with any issues promptly, especially where they might give rise to health and safety problems.

For example, bikes in hallways can block potential fire escapes and more landlords are providing secure bike storage for this reason. Also, a busy laundry schedule without adequate ventilation might lead to damp problems if left unchecked.

Maintenance and refurbishment

Last but not least, student properties get a lot of wear and tear and landlords need to be prepared for regular maintenance.

Deep cleaning is recommended between tenancies and regular painting is a good idea especially in heavy traffic areas.

For more involved refurbishments, like a new kitchen or bathroom, it can be difficult to find a time that suits everyone but the long summer holidays are usually a good option.

Alternatively, provided your tradesmen are lined up for a quick turnaround, there might be time over the Christmas break as the students won’t typically return until the third week in January.

Existing buy-to-let customers?

If you already have an existing buy-to-let mortgage with Paragon, why not register to view your account online? For more information visit www.paragonbank.co.uk.

31 August 2018

1. Source: Q1 2018 Landlords Panel study from BDRC based on 1,043 online interviews conducted between 9 and 20 March 2018, with members and associates of the National Landlords Association (NLA).

Paragon Banking Group PLC.  Registered in England number 2336032.  Registered office 51 Homer Road, Solihull, West Midlands  B91 3QJ.