Despite the rollercoaster that is the UK property market, investors are still keen to take on buy-to-let mortgages, often with the aim of becoming student landlords.
Online searches for `cheapest buy-to-let mortgages’ have increased by 160% in the last 12 months, as investors seek out the best ways to make a return on property investment and mitigate losses from the cost of living crisis.
Experts in Uswitch’s buy to let mortgages team analysed university towns and cities to identify the most investable for student landlords. Along with profit, the analysis considered house price and the percentage of students renting there, which enabled each university to be given a score out of 10.
Scottish university cities emerge as the best places for student landlords to buy property, as illustrated by the table below, with five universities there making the top ten.
|Rank||University||City||Average house price (£)||Average student yearly rent (£)||Students renting %||Final score|
|1||Royal Conservatoire of Scotland||Glasgow||£198,747||£9,360||52%||8.05|
|2||The University of Edinburgh||Edinburgh||£324,801||£11,544||52%||7.44|
|3||The University of Glasgow||Glasgow||£198,747||£8,320||46%||7.41|
|4||Imperial College of Science, Technology and Medicine||London||£691,018||£9,800||56%||7.15|
|=5||Robert Gordon University||Aberdeen||£192,930||£9,360||48%||6.91|
|=5||London School of Hygiene and Tropical Medicine||London||£691,018||£9,620||57%||6.91|
|7||Glasgow Caledonian University||Glasgow||£198,747||£10,192||35%||6.80|
|8||London School of Economics and Political Science||London||£691,018||£10,400||47%||6.77|
|9||The University of Lancaster||Lancaster||£192,685||£7,020||50%||6.68|
|10||The University of Warwick||Warwick||£350,326||£10,244||42%||6.65|
Analysis of the results
Taking top spot as the best university town for student landlords to invest in is Glasgow, notably houses near the Royal Conservatoire of Scotland, which offer high rental yields. House prices here are 39% less than those close to the University of Edinburgh, and with the average student rent at £9,360 per year, landlords can earn back 4.7% of their home’s value every year.
In comparison, student landlords in Edinburgh receive 3.6% of their house’s value per year. In England, student landlords renting near the Imperial College of Science, Technology and Medicine see the best profits.
Why invest in student property?
According to 43% of UK landlords, the advantage of student property investment is that it’s easy to find tenants. With the Royal Conservatoire this is especially relevant as 52.3% choose to rent student accommodation. Landlords looking to invest in the area should note that one in five students in Glasgow rank proximity to their university (20%) and security (20%) as their top accommodation priorities.
In second place, the University of Edinburgh scores highly because of high annual rental costs: the city has the second highest average yearly rent in the UK at £11,544. Edinburgh students also have fewer disputes with landlords with 33% never having any issues, which is 6% above the UK average of 27%.
In third place is the University of Glasgow, where landlords will see 4.2% of their investment returned each year. While this is 0.6% more than the University of Edinburgh, it’s reduced by a smaller percentage of students renting (45.7%) than the Royal Conservatoire of Scotland (52.3%), and the University of Edinburgh (52.0%).
What do students look for in a landlord?
Honesty is the quality that students most want to see in a landlord, according to research from the Uswitch.com buy-to-let mortgages statistics page: 17% of students value it above communication (16%), and abiding by their contract (11%). Similarly, honesty in their tenants is prized by 50% of landlords.
How to get into the student property market
Buy-to-let expert, Kellie Steed said:
Buying a property to let is exciting, but unless you can afford to buy a home outright, you will need a buy-to-let mortgage to finance the property. It’s also important to consider how well-suited you are to the responsibilities involved with being a landlord.
Consider your deposit – you will typically need a deposit of 25% or more for a buy-to-let mortgage, so look at your current assets and financial position to see if this works for you. Renting out a property to tenants when you have a residential mortgage is classed as mortgage fraud and could result in hefty fees or even having your mortgage withdrawn entirely.
Research popular student areas
Think about what’s important to tenants, and which locations offer those qualities. While the choice of location can influence the income your property could make, it’s also important to consider factors like distance from public transport, and how to make your rental property desirable.
Decide what kind of landlord you want to be. Your relationship with tenants and the level of personal effort required will hinge on whether you are a full-time or part-time landlord. A full-time landlord is responsible for rent collection, property repairs, and communication with the occupants, part-time landlords simply own the mortgage and the property. They employ a property management agency – which means less responsibility, but also less profit for you, as agencies usually take somewhere between 10%-20% of the rental income.
Other points to consider about student housing
As well as rental yield, it’s also worth considering whether there is more than one university in the town or city you have in mind – obviously, a huge student population is an advantage in terms of student demand. For example, Manchester has five universities and a large student population of 40,250 – the third biggest in the UK. Remember to concentrate on well-known areas for students, although city centre locations are always popular.
Student accommodation investment opportunities range from traditional mature housing to purpose built student accommodation, and bear in mind that you may be competing with university owned accommodation. You may want to own and manage a house in multiple occupation (HMO) – a house with at least three tenants living there and forming more than one household. A student household of five or more tenants is classed as a large HMO, and this category must meet certain criteria such as holding a licence from the local council. While student HMOs can return the best yields, they require significant management which could eat into your profits.
A final point is that while it’s prudent to be aware of possible property market dips, you could expect capital growth if you’re planning on investing in student properties for the long term.