Which UK city promises the best return for landlords catering for students? Oxford or Cambridge, perhaps? London, maybe? The answer is Coventry, and the reason is straightforward: it’s one of the only cities in the country that has two major Universities in Coventry and Warwick (which is second).
According to the Coventry Telegraph a landlord can expect a yield of 6.03% on their investment, equating to £1,780 a month. It wouldn’t take too long to pay off a mortgage at that rate, and then save some more for a deposit – to start the process over by buying another home to rent again.
Hoovering up homes with multiple bedrooms that are near Universities or their bus routes would seem like printing money, providing one can get a mortgage. Lenders traditionally want a higher deposit before agreeing to a buy-to-let mortgage, and the mortgage offer itself may depend on the rent that you are intending to charge.
It’s not all plain sailing. Students are messy creatures, so packing several of them into a home and expecting it to stay immaculate is naïve at best. That said, most won’t be staying for more than a year or two, and there’s always a deposit you can take from them.
Some non-student residents can be antagonistic towards students, and it can sometimes be difficult to gain planning permission. There’s also a risk that, as with any buy-to-let, you might not get the numbers to rent the home. Councillors in Plymouth recently expressed concern that new ‘large-scale’ accommodation blocks – a growing trend in our cities – would remain unfilled. Despite developers attempting to quash these fears, they are commonplace. As student debt continues to rise, many just go straight into employment at 18 years of age and leave studying behind.
Be aware also that students and DIY don’t normally mix. You’ll also benefit from paying an estate agent such as HouseSimple.com to find the tenants, produce the paperwork and iron out any legal issues, and pay regular checks to the property.
The more experience you gain, the more you’ll be aware of what’s important to students and therefore which homes to target. The market is changing constantly and there are always offers that seem too good to be true, which often means that they are. For example, The Telegraph reported on the phenomena of purpose-built accommodation ‘pods’, comprising gyms, cafes and en-suite bathrooms.
They promise returns of 35% over five years, and as much as 10% in year 1, but there are disadvantages. The pods are usually sold on a cash-only basis, and sold before they are even completed – meaning that the buyer is liable to lose their money should the developers’ company collapse. Several high-profile court cases have ensued from the fallout.
Don’t let that put you off completely. Student housing has been described as one of the best performing asset classes in Britain, and for good reason. The key is research, backed up by experience and the money to get the right home. Look at bus routes and takeaways and shopping centres and bars, seek advice from students and landlords and estate agents. And then buy a home to make a perfect pad for a grad – and a few pennies for yourself.