Summer is usually the slow season for student landlords, as of the end of May most students will have finished their academic year and will be heading home. However, just because there are fewer students about in the summer doesn’t mean you should just leave your properties to sit there! So here is our guide to summer for student landlords: Continue reading
HMOs, or Houses in Multiple Occupation, are seen by some as being an easy way to make money in the lettings business. It is true that the profits made on HMOs tend to be higher than the profits made on other types of property. The average rental yield on HMOs is around 11%, compared to an average of around 6-7% for standard lettings. That doesn’t mean, however, that HMO letting is easy.
An HMO is defined as any property where three or more unrelated people live together. That includes homes shared by groups of professionals or students, houses made up of bedsits, and more formal settings such as halls of residence. HMOs are subject to stricter regulations than other properties. As well as the landlord’s general responsibility to keep a property in a safe condition, there are extra demands made of HMO landlords. They include the need to keep hallways clear, install fire alarms and to register the property with the local council.
That might all sound like a lot of hard work, and it can be compared to renting to families. However, having several tenants all paying rent separately means rents can be set higher without squeezing tenants’ budgets unreasonably. Having rent payments coming in from individual tenants also helps protect you (and your mortgage) from arrears: while one tenant might run into difficulties paying, it is unlikely that their fellow tenants will have problems at the same time.
Being a Good HMO Landlord
As well as meeting local authority requirements and registering their property, HMO landlords should bear in mind some of the extra responsibilities that come with this kind of letting. The reason that HMOs are more heavily regulated than other properties is that groups of (often young) people living together are generally harder to manage than families. If you are thinking of tapping in to the high yields to be had from HMO letting, here are some of the things you need to bear in mind.
• You will usually need specialist HMO landlords insurance.
• You will need to be willing to check references thoroughly to try and avoid rowdy tenants, and to deal with anti-social behaviour before it becomes a nuisance to others. You can be held responsible if you don’t.
• You have to keep track of who lives in the property – don’t allow tenants to sublet rooms without your permission or you could fall foul of regulations.
• You are responsible for making sure council tax is paid – it is usually easiest to include this in the rent.
Student tenants are often targeted by landlords, despite their reputation for being noisy and leaving properties in a poor state once they move out. But that stereotype is far from always fair, and students lettings often bring higher yields than other lettings. Letting to students can sometimes be harder work than letting to professionals or families. So is it worth it?
Why to be a Student Landlord…
When you buy a student property, you have a guaranteed market. University towns and cities tend to have distinct student areas along transport routes to the university. Buy in those areas and you have a captive market. Often, these areas are the cheaper parts of the city, so the initial investment is lower. Students also tend not to be too bothered about matching bathroom suites or brand new kitchens. That doesn’t mean you should try and rent out a wreck to students, but as long as everything is clean and in a good state of repair, you don’t need to put in the latest designer features either.
Students will generally pay their rent up-front in termly instalments when their loan money comes in, or their parents may pay. That tends to mean that while they have less money than other tenants, their rent payments should be relatively reliable.
Rental yields for student properties often hit over 10%, especially if you can find a bargain property, and occupancy levels should be high.
…And why Not to be
Students are usually young people away from home for the first time. Their first concern is probably not likely to be how much sleep their neighbours are getting, or whether the grass needs mowing. They are still learning how to look after a home and operate in the adult world. They might not be as fussy about décor as others, but they may be less likely to be able to deal with basic problems such as a radiator that needs bleeding, which other tenants would do themselves. If you let to students, you need to be aware that you have to deal with problems more regularly than you might otherwise have to. They might not be as capable at looking after the property as others, so make sure you have that all-important landlords insurance in place.
Finally, some experts are now warning that student yields are likely to drop as fees increase, and student numbers decrease. Many students who would previously have moved away to go to university may stay at home with parents, and in their place may come more foreign students, who often have more money and prefer to stay in university or privately owned halls. Only time will tell, but for now, student property is still a good investment.
It has been reported in the property news this week that Assetz, a property investment advice firm, has warned that this year is not one for taking punts when investing in certain areas. They have warned that the difficult state of the Eurozone could negatively hit prices here in the UK, even though buy-to-let is likely to continue growing this year.
Popular Areas and Bargains
Popular residential areas where employment is at a good level and where there is a strong infrastructure are of course going to lead to strong tenant demand, and it is inevitable that demand is likely to continue outstripping supply in such areas.
However, that doesn’t mean a bargain that will ultimately make you money cannot be found in areas of high unemployment. If you research hard enough you may find that certain areas of the country may have a high unemployment level, but such areas may also have a university nearby and therefore a strong student population. And of course, students need accommodation!
Letting to students, in any part of the country, could indeed prove a winning situation for any property investor. Letting to students can be very tricky business however. Student properties often suffer from damages. Many students like to have parties involving alcohol which can in turn lead to damages being sustained. A good way to protect yourself is, of course, with landlord insurance. If accidental damage is incurred, a decent insurance policy will protect you against the cost of repairs.
Furthermore, students often live off their student loan which comes in once a term on a specific date. This all means that cash and rent payments can sometimes be a bit of an issue for students so it will be worth keeping in mind that rent payments may be a little late sometimes.
Also, whilst rent is normally charged on a monthly rate, when letting to students it may be an idea to think about charging rent every quarter, and perhaps it will be a good idea to advertise the level of rent as a weekly amount; for example, £80 a week including bills that is then paid quarterly. This means students can pay you once their loan is in every quarter, as chasing rent every month will become a bit of a hassle for both you, and the student.
There are of course, a lot of positives about student letting, such as, a continuous supply of students and therefore a continuous supply of tenants, provided your property remains attractive and affordable.
Student property can be a pleasure to invest in as it can be very profitable. Students will also normally be relatively easy to work with and provided you have a good working relationship with your tenants, it should be a stress free process.
The number of first time buyers who are struggling to get a mortgage and save a deposit to get onto the property ladder is increasing, so it’s no surprise that a large proportion of the rental property market is under the age of 35.
It would be helpful to think about how you could market your property to this age group and what types of people might be renting your property.
A lot of under 35s are young professionals, maybe graduates or school leavers looking to move away from home. Many young professionals will look for a property that’s convenient to transport, as they’ll have to commute to their work. Because they are usually always on the go, many would really appreciate facilities in the property like washing machines, dryers and dishwashers. It’s always important to screen your tenants and conduct proper credit checks, though it’s unlikely that you will encounter difficulty with any tenant.
Having a property near to a good college or university will be sure to bring you income. Most students are laid back when it comes to any problems to their property, however, students are known for occasionally causing breakages to property, so to minimise the impact of these accidents, you should take out landlords insurance.
Letting to the under 35s might be where the bulk of your rental income will come from, so you should be well kitted out to provide a property that is functional for young people.
If you are considering letting to younger people, marketing online can be a good tool for attracting them and it’s worth taking time to research the marketing potential of sites online.
With A-level results out later this week, landlords in many of the UK’s provincial towns and cities as well as the capital will be anticipating a new influx of tenants.
It is expected once again that the pass rate for A-levels will supersede anything previously seen and with it a rush for university places. It may well also precipitate a rush in quotes for cheap landlord insurance. Although it is most certainly wrong to tar everyone with the same brush, it would be a foolhardy landlord who did not secure landlord insurance for properties housing students.
Very often the teenagers are away from home for the first time and are embarking on a steep learning curve not only in education, but also in the art of caring for oneself and their belongings. They will encounter problems that have always been sorted by their parents and will be doing household chores and using household implements that simply were not in their domain before.
Accidents will happen and with it damage to properties. A tap left running can not only cause flood damage to the room in question, but there is the added danger of the water finding its way downstairs causing damage to the room below, which may well be used by another student in the same house. It is a common site in student halls of residence to see the fire brigade on call. Usually because a smoke alarm has been activated by an unsuspecting student not yet versed in the art of cooking or the geography of their new flat.
It will pay a landlord great dividends to welcome and support his new tenants in whatever way he can. Time spent with the students in the first few weeks of their tenancy can go a long way to building up a good relationship with customers, who could well be renting the property for at least 3 years. Take time to explain the kitchen, the heating system and the plumbing. Any good landlord will have ensured all safety requirements are met anyway, but go to great lengths to explain fire rules and how electrical appliances work. It will also help to meet parents, they will take comfort in the knowledge that their fledglings are in the hands of a good landlord and remember there is often a younger sibling who will be looking for rooms a couple of years hence.