Out of all available housing options, most university students choose to rent privately owned property. As an established or aspiring landlord, in response to that huge demand, you might be thinking about accepting students as tenants.
When considering renting to students, your concerns may be about a greater risk of wear and tear to your property. While university students are often thought of as being destructive and wildly social, the opposite might be just as likely. More than half of students’ outgoings are spent on rent and 71% of students worry about making ends meet. These monetary concerns could actually drive them to be more careful with your property; this is likely their first investment of this size, and they wouldn’t want to lose their deposit.
So, what are the real pros and cons of renting out to students? We cover the main points here, to help you weigh up whether renting to students is something you’d like to embark upon.
Pro: Growing Market
The number of students in the UK is always growing. In 1993, there were around 1 million students aged 18-24 in the UK. By 2016, that number had nearly doubled to around 1.9 million.
There will likely always be growth in student enrolment rates as higher education degrees become more and more sought after by employers; degrees are then sought by university applicants in order to become more employable.
As well as this, the UK population in general is always growing, now at a rate of about 0.5%, and so always producing more students!
If your rental property is near a university or in a student-heavy area, and you choose to let to students, you’ll never be short of potential tenants!
Con: Term Lengths
As a university academic year is typically September to April or early May, the summer break might become problematic to your income stability.
It’s popular amongst students to be away from their university during the summer months, whether that’s to temporarily move back home with their parents or go travelling, most see the summer break as an opportunity to holiday. This could mean that you’re left without tenants for that period, and losing out financially as a result.
However, this loss can be avoided! You have three options:
- Only accept full rent, for the whole year. If property is in high demand in your area, or the student intends to continue living in the property the following academic year, this is a reasonable move. Paying during the summer ensures they still have a place to live when they return.
- Rent the property out as a summer holiday home. If your property is in a popular city or a particularly scenic area, this option can be particularly effective.
- Charge a reduced rate of rent that enables students to reserve the property for the summer. This is obviously the least profitable option, but in low-demand areas, this might be the most viable option for you. But it still means you won’t totally lose out during the summer periods
The tendency for students to move away from university during their summer break could be a drawback to student renting, though it is possible to work around successfully.
Pro: High Rental Yield
Rental yield, simply put, is the value of the rent you receive per year, as a percentage. It’s calculated by dividing the annual rental income by the price of the property and then multiplying that by 100. The higher the rental yield percentage, the faster you’ll make back the initial investment you made on your property.
It’s common for groups of students to rent a house together, rather than pay more for individual housing. In this case, your single property could have anywhere from 3 to 6 (or more!) occupants. If you charge per room, you could earn significantly more than you would renting to a single family, especially if you convert living areas or other spare space into more bedrooms. As a result, student landlords report some of the highest rental yields of all!
Students also tend to be fairly un-fussy about their rented property’s furnishings. As this is likely their first home in which they are independently living, they might not be as concerned with high-tech or sleek-looking interiors, especially since they have a degree to worry about! As long as the property’s furnishings are decent and functional, and all necessities are covered, it won’t matter too much if they’re fairly basic. Saving money on high-end furniture will help towards your rental yield.
Student landlords have a greater likelihood of high rental yields!
Con: Stricter Standards
Since you’ll be renting your property to a group of friends rather than a single family, student lets are often classed as HMOs (House in Multiple Occupation). In order to be classified as an HMO, your property must be rented by 3 or more people who are not from a single ‘household’ (e.g. are not a family), but share facilities like the bathroom and kitchen. An HMO is classified as ‘large’ if the number of people renting is 5 or more.
HMOs are generally more complex than standard buy-to-lets, as they have to comply with more regulation. Large HMOs, or HMOs in certain areas, require the landlord to acquire an HMO license. The license calls for you to meet strict standards, often requiring extra expenses.
Check out the full government guide on HMO management.
Undoubtedly, a potentially costly HMO license can be a turn-off for landlords interested in renting to students. Keeping your HMO ‘small’, however, could help to reduce costs, depending on your local council’s policies.
So, is renting to students for you?
Consider whether your property is suitable for student rental, whether you’re willing to be flexible with short-term leases and what HMO policies your local council has in place.
While it could require you to comply with some stricter standards and cooperate with your tenant’s uniquely student needs, renting to university students has the potential to bring high rent yields and a huge demand for your property!
If you need help determining your rental strategy, get in touch with our experts today to see how we can help you!