If you live with a teenager of a certain age, by now you will probably know if
they are off to university in October, and if so, where they are headed.
If you have left it late to find accommodation, it’s unlikely that you’ll have
time to buy them a place to live for the first year, although,
traditionally, students start off slumming it in noisy, vomit-ridden halls
of residence – so that they get the complete student experience, you see.
But should you buy somewhere for them to live in the years after that, a
property you can also rent out to their mates? Your progeny might thank you
if you do. Living costs, unsurprisingly, are a big undergraduate worry, says Accommodationforstudents.com,
an independent student rental website. The average student rent in Britain
is £60.58 a week, it says, 4% higher than last year. Your child will have to
cough up a lot more if they are studying at St Andrews (£82.56), Cambridge
(£84.15), or – gulp – the University of London (£102.33). That’s a lot of
bar jobs to cover the annual rent.
The other point about buying somewhere for your student offspring is that
house values in university towns have traditionally been copper-bottomed.
So, after your little darling has got a first from Cambridge, Exeter or
Liverpool, the house in which they partied – sorry, studied – may go on
making money.
Before you rush off to inspect the nearest property magazine for wherever they
are heading to, do research. Make sure you are not buying something that
will be in competition with a giant, dedicated student block. Not only do
these have close links with university accommodation offices, they tend to
be built next to clubs, shops and cinemas frequented by students, who are
themselves becoming surprisingly picky. Such blocks tend to offer upmarket
features such as broadband, and are increasingly popular in places such as
Manchester, which have student “villages”.
“We now have about 200 on our site, and the figure is growing all the time,”
says William Berry, director of Accommodationforstudents. com. “They rent
out at a similar price to traditional student houses, but have better
facilities, including concierge services and improved security. I would say
they are a preferred option for students – they always get booked up first.”
Still, let’s not panic; while 31% of Britain’s 3modd students live at home,
and 5% in commercial blocks, he says, about 35% end up in traditional shared
houses, where the yields, frankly, are rather decent. In some places, they
are so decent, you don’t even need a blood relative studying there to have a
reason to buy.
Landlord Mortgages, a buy-to-let mortgage broker, has produced a table of
annual rental yields for property in university towns. It reveals that if
you were to invest in a student house in Durham (average house price
£114,588), you could expect an annual rent of £10,447 from that average
house, providing an impressive rental yield of 9.12%.
The house needn’t resemble a student drop-in centre, either: this figure is
reached with three tenants per house. Nottingham (9.05% yield) and Stoke
(7.13%) seem attractive, too. Crewe, with high house prices and static
rents, is at the bottom of the table, with yields of just 3.4% – way below
the national average, 6.59%.
Speak to real landlords, however, and the picture is less clear-cut. “When it
worked, we found it was great,” says Martyn Witt, a logistics manager who,
five years ago, paid £100,000 for a six-bedroom house in Nottingham for his
student daughter. On paper, this looked great. In reality, it was
problematic.
“Last year, we couldn’t fill it at all,” he says. “Student numbers in
Nottingham had declined, and there are now a lot of dedicated commercial
blocks. Essentially, there was a glut of properties, and it was hard for
amateurs like us.
“We were also stung by the amount of regulations brought in for houses of
multiple occupancy. It made running the house almost unmanageable. It’s not
easy if you are a one-man band. It served its purpose, but we were a bit
disappointed with how the demand fell away.”
The house is for sale for £175,000 – so, five years on, what with the void
periods and having had a lot of work done, there’s not even much profit
looming. His second daughter hopes to attend Portsmouth. Would he do it
again? “I doubt it. The private market is tough unless you have industrial
quantities of property to let.”
However, David Knight, a professional landlord who has spent 10 years building
up a portfolio of 30 student houses in Surbiton and Brighton, has found that
if you are able to crack the student market, you can do very nicely. “We
rent out to students at Brighton and Kingston universities,” he says. “It
works for us because my wife and I do all the work ourselves, and we don’t
go through agents.
“In our experience, students are good people to deal with. They are
straightforward, as honest as most tenants are, and they pay their rent on
time.” Dear fellow landlord, what more could you ask for?
An investment in student accommodation, even if it is for a family member,
must be as thoroughly researched as any other buy-to-let purchase. League
tables showing comparisons of yields are all very well, but there is nothing
quite like doing the rounds yourself, speaking to estate agents and
interviewing staff at the university accommodation office. Questions you
might ask include: are house prices in the town or city stable? Is the
university due to expand, meaning more demand for accommodation, or
contract, meaning the reverse? In York, for example, there are plans to
expand the size of the university by 50%. Is a glut of giant, purpose-built
buildings, which will provide stiff competition, about to come on stream?
Furthermore, where do the students actually live? Do they congregate by the
university or in some other district? You’ll never get your house rented if
it’s not in a desirable area. By the same token, is a desirable student area
somewhere that might appeal to other potential renters?
If you are a parent, you should find out how your little darlings feel about
being their mates’ landlord – or your tenant. You might save lots of money,
but will that be worth it if the situation leads to family tension?
As an investor, you need to be a great deal more informed than an
undergraduate at freshers’ week.
buytolet@sunday-times.co.uk
Dear Rosie, My son is a medical student in Nottitngham, he is going into his 3rd year and 2 days ago he left from Argentina where we presently stay to return to his studies. The house he had rented togethe with his 6 pals apparently was left in shambles after the last lot of students left. When he arrived, there was no hot water, no electricity, no internet connection etc etc. As a desperate mother, I feel keen to buy a house in Nottingham so that he and his pals could stay but I only have money for the 10% deposit and do not want to get into financial problems like the owners of the Nottingham house quoted .How can I get in touch with them so that the boys can see if that house is suitable for their needs. I am advising that they move out within days if the landlord does not rectify the contractual terms.
Jayshree Balan, Buenos Aires, Argentina
Hello Rosie
I am very keen to take your advice about buying a showhome and renting it back to the developer for the duration of their stay on site. I am finding it very difficult to find a developer in the south west. Does this only happen in London?
Please help.
Tania Merrifield, Bath, Somerset
HMO Buy To Let is an area that investors now feel they can actuall make a monthly income. My company are now seeing landlords who previously thought that Houses in Multiple Occupation were too regulated seeking out HMO Buy To Lets. The rising student population and the shortage of this property caused by landlords leaving the sector makes good for the future. Capital growth and monthly income amkes the extra work worthwhile it seems
Nicholas Marr, Rickmansworth, Hertfordshire
The recent articles on the fabulous returns available in Durham (and probably other cities) seem to be based upon a complete lack of understanding of the region. Student properties commanding the rents quoted exist only in Durham City itself. The district actually covers outlying former mining villages with hugely differing property prices lowering the average. Add at the very least 60% on averages quoted to get a realistic price in a student area. We live here, we are landlords (not student), we know the city. If such bargains were available, and letting demand high, the market would quickly have respond with a massive price increase! In fact there is a surplus of property in town with many voids. Student lets are simply not that great a buy here, and justified local resistance to this awful phenomenon will make them increasingly problematic. Remember the maxim of the market: if it looks too good to be true - it probably is!
Tony, Durham, United Kingdom
This is the second time I have seen this survey quoted by the SundayTimes of university city rentals. Frankly it is hilarious - at least as far as Durham is concerned. Yes - you can probably buy a 3 bed house for £115K somewhere in the DISTRICT of Durham - but certainly not in the City which is where the students wish to live. And yes - you can probably still get a weekly rental of £67 per week per student but only in the City centre - where you can expect to pay £170K at the very least for a modest terraced house. See for yourself - go to Up My Street or similar house price site and type in DH1 for a postcode.
Kate Johnson, Durham,