Renting to students: what you need to know

The student market has been a very popular segment of the buy-to-let sector for a long time, but the reputation of students has evolved. For many years it was considered that students had very low expectations of a property and their unfussy nature was there to be exploited by landlords. They were also liable to have 24/7 parties and cause never-ending public nuisance and untold wear and tear on a property.

By Jon Howe4/27/21

Renting to students: what you need to know

The student market has been a very popular segment of the buy-to-let sector for a long time, but the reputation of students has evolved. For many years it was considered that students had very low expectations of a property and their unfussy nature was there to be exploited by landlords. They were also liable to have 24/7 parties and cause never-ending public nuisance and untold wear and tear on a property.

Undoubtedly there is still a large percentage of the student population who thrive on that reputation, but equally some of the big university towns and cities have relatively plush new-build apartment blocks and students are a little more savvy and have higher expectations, such as fast and reliable WiFi and smart security systems.

However, whilst it is not for everyone, the student market is still a potentially lucrative one, but there are many pros and cons to consider. For this article we are looking at the typical student properties that have traditionally existed, rather than the new, high-rise complexes that are springing up in city centres, and there are still plenty of these traditional properties in existence. So whether you are a professional landlord or a parent trying to look after their child and hoping to earn a decent income from their investment, here is a comprehensive guide to everything you need to know about being a student landlord.

What is a typical student property?

Most towns and cities with an established university have traditional areas where there is a high concentration of ‘student’ properties. People know this, and it helps in the process of marketing properties to rent out and in buying and selling properties in the first place. These areas tend to be close to university campuses, but also close to city centres. Like Headingley in Leeds, for example, they can also become a town in themselves and have good access to supermarkets, bus routes, banks and of course bars, cafes and restaurants. Having easy links to a thriving social scene and nightlife is pretty much essential for a student property.

These areas tend to evolve away from more exclusive locations where good schools are important, i.e. in out-of-town suburbs where families might live, and inevitably these areas become cheaper because there is a well-defined market that doesn’t change. Many student areas around the UK have become popular because of the abundance of larger Victorian properties, which have three or four storeys with many rooms that can be adapted and divided up in to houses of multiple occupation (HMOs). These are very attractive to student landlords because they offer more earning potential.

So a typical student property would be early 20<sup>th</sup>-century-built, with a minimum of three bedrooms, the more the better, and with large communal spaces, i.e. lounges and kitchens. Increasingly, students are wanting a decent outside space, but it is rare for things like car parking to be desired.

What makes renting to students lucrative?

Generally speaking, the student market follows national trends in terms of how to make money as a student landlord. A landlord in London is unlikely to make as much money as a landlord in one of the big, northern university cities, because properties are cheaper to buy outside the capital in the first place. But also there are some traditional university cities such as Nottingham, Manchester, Leeds and Sheffield which have solid student markets and will usually produce a higher rental yield % than other areas, because the strength of the university culture produces higher demand.

Put simply, the student market can be more lucrative because there are more people renting the property, so you can rent out individual rooms to individual people, rather than offering a single tenancy to a single family. Within a fair and reasonable agreement, a landlord can add a small premium to each person without it being prohibitive, and hence renting to five individual people becomes more lucrative than renting to a family of five people.

What are the legal aspects of being a student landlord?

There are several legal and regulatory considerations which set the student landlord apart from a regular landlord, but which in most cases will save you considerable pain, hassle and expense.

  • Tenancy agreement – Most student landlords opt to offer a ‘joint tenancy agreement’. This will be signed by all the occupants together and holds them all equally liable to cover their rent and bills, and to find a new tenant to fill a room if someone moves out. So if one tenant fails to pay their rent, the others are liable to cover it, or a guarantor (usually a parent) may be, if this is stipulated in the contract. This covers the landlord if the students become unreliable, and of course is ideal if the students rent the property as a group of friends. However, you may opt to rent out each individual room to individual people who don’t necessarily know each other. This can be done via individual tenancy agreements for each bedroom and the use of communal spaces. In either case it is worth stipulating some ground rules about damage and parties, even if this is just a deterrent, as they will inevitably happen anyway.
  • HMOs – A small HMO is classed as a property let to three people who are not from the same household, whilst a large HMO is classed as being three or more storeys high and let to five or more people. A landlord will need to obtain a licence to rent out a large HMO, and in some areas you also need a licence to rent out a small HMO. You should check with your local council what applies in the area you are looking to purchase and rent out.
  • Council Tax – Students are exempt from paying council tax, but they need to obtain an exemption certificate from the council to prove this. You need to follow-up on this and ensure it is done, and you also need to have proof that students have occupied your property, or you could be liable in the future to pay back-dated council tax that remains outstanding.
  • Insurance – A landlord needs to state on his/her insurance policy that they are letting a property to students, or you risk not being covered for much of the policy. Student areas do become burglary hotspots, because they have a cheaper reputation, but also it is known that students are less security conscious and a property is likely to contain more TVs, laptops and tablets etc than a normal household. This can be reflected in insurance and also the security measures that are expected. You should be aware that only the landlord’s contents will be covered by contents insurance, so it is important to do an accurate inventory of what is provided with the tenancy, and also that students obtain their own insurance policies to cover what they bring to the property.
  • Inventory – A detailed and accurate inventory – with photos where possible – is very important for insurance and for settling any claims and disputes over deposits that may arise. This inventory should detail everything that is provided with the tenancy and should also cover the condition of the property, ie to cover damage and what is reasonable wear and tear. This should be updated at the end of each tenancy and should be made available for the tenants to reference at all times.
  • Safety – As with any tenancy, the landlord is liable for providing safe gas and electric supplies and providing alarm systems and furnishings which cover current safety regulations. The student landlord also needs to provide an environmental performance certificate and make this available to the tenants.
  • Deposit protection – The student landlord must retain the tenants’ deposits in one of the Government’s approved deposit protection schemes.
  • Right to rent – The student landlord must comply with the right to rent regulations and carry out the proper checks on immigration status to ensure that prospective tenants are allowed to rent property in the UK.

What are the advantages of being a student landlord?

  • High demand – The stable and repeating nature of university terms means there will always be high demand for your property, presuming it is a suitable property type and in a suitable location. The demand is regular, consistent and predictable, and pitched right, you should never struggle to fill your property.
  • Stable market – Because most student areas are well established, this means you should find it quite easy to sell the property at any time you choose to. There should be many landlords willing to take on the property and the student market doesn’t tend to suffer from volatile trends seen in other property markets.
  • Defined rental periods – Whilst some landlords may prefer long term rentals, you know that your tenants will be in the property for the duration of a university year, usually September to June. Some may stay for a second year or more. However, you can start to market a new tenancy from January onwards, as most students like to have next year’s property sorted out well in advance.
  • Cheaper properties – Although standards and expectations have changed in recent years, student properties are still typically cheaper to purchase and to furnish, as they don’t have to be a perfect spec or fit the high demands of a young professional couple or a family.
  • Typically higher yields – In most cases there is a higher earning potential from a student property because each individual is paying rent for individual rooms, rather than one family paying for the whole property.
  • Approved landlord lists – It is possible to work with local universities and letting agencies to appear on approved landlord lists. You will have to fulfil certain criteria but this immediately gives you a leg-up and builds your reputation as a trusted and respected landlord.
  • Word-of-mouth – In many cases students are facing their first experience of living away from home, and in some respects need their hand holding. You can quite easily become a reputable landlord by being empathetic and compassionate about this big change in someone’s life. And given the social networks that students exist in, this can lead to a good potential for word-of-mouth recommendations, and mean you fill your property quicker and easier.

What are the disadvantages of being a student landlord?

  • Short term – There is a natural turnover in tenants which might not suit some landlords as you are regularly needing to fill rooms or the entire property.
  • Wear and tear – There might not be 24/7 parties, but student properties can still take some hammer, even if the tenants are respectful. Also, because you are dealing with young people with little life experience, ‘maintenance’ calls at unsociable hours may be more frequent. All damaged and worn goods will need replacing during or at the end of the tenancy.
  • Finances – Students are notoriously bad at financial management and prioritising what is important. This might be less of a cliché than it used to be, but there is more likelihood that you will need to chase rent payments and you might have hassle with bills not being paid. A tenancy agreement should cover liability, but unreliable tenants can still be a problem. Bills will almost certainly be higher also, as tenants will be less diligent with heating and electricity usage.
  • Nuisance – There is an increased likelihood of having to deal with public nuisance issues, such as noise and rubbish building up. Again, this is less of a stereotype than it used to be, but does still happen.
  • Furnished property – Students will usually expect a property to be fully-furnished. So you will need to provide white goods, sofas, beds, a desk and chair etc.
  • References – It is unlikely that students will be able to provide any references from their previous rental history, or that you will be able to carry out a credit history check. You will need to request that a parent acts as a guarantor, which isn’t always straightforward.
  • Void periods – It is possible to request that students pay rent over the summer and holiday periods, and obviously this is easy if tenants are already occupying the property in summer, or choose to stay over Easter, for example. But most tenancy agreements cover term times only. Therefore you face possible ‘void’ periods where you will receive no rental income. Most landlords are able to budget for this as it is expected, and also, for a very desirable property some students may pay rent over the summer in order to secure it.

Should I become a student landlord?

There is no hiding from the fact that being a student landlord is perhaps more hands-on than renting out a property in other markets. But some people like that aspect, and the typically larger rewards justify the work involved. It is also true that there are a number of ‘essentials’ you need to look after, and which should make the journey to becoming an established and successful student landlord a lot easier:

  • Choose the right type of property in the right area
  • Shop wisely and don’t overspend on furnishings and fittings
  • Be a friendly and compassionate landlord who can be trusted
  • Make sure your tenancy agreement is watertight and covers yourself against non-payment etc
  • Secure a parent as a guarantor if possible
  • Get yourself on the university’s approved landlord list
  • Get yourself an HMO licence if applicable
  • Make a detailed inventory of what is provided with the property

If you take care of these essential elements then being a student landlord can provide a stable and dependable income over a long term period, and could prove to be a very wise investment.

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