INVESTING IN STUDENT LETTINGS
LettingFocus.com property investment expert David Lawrenson explains why student lets can make sense.
Property advisor David Lawrenson of www.LettingFocus.com says, "If your son or daughter is going to university you might be considering buying some accommodation for them to live in and let out."
There are some plus points to this.
For a start you will save on accommodation costs. For example, in London, it costs a minimum of £130 per week for a decent room in a house share and the rental income you can get from other students can be good with yields over 5% in some towns.
Capital growth can be good too. Figures from the Halifax have shown that property prices in the main university towns have outperformed the market in the last few years, driven by the huge increase in student numbers in recent years.
CONSIDER DEMAND AND SUPPLY OF STUDENT PROPERTY
But whilst the last government’s target of having 50% of children going through college by led to a 2.5% increase in student numbers each year, in the student market, the supply of student accommodation can still change quickly.
A few new halls of residence and self catering blocks can quickly change the demand-supply balance and make rents fall and properties hard to let.
So ask the Accommodation Office and at the Town Hall Planning Office to find out about future growth in student numbers and to see what new developments are planned.
And don’t think “Rigsbyesque” student let accommodation will do. It won’t.
Other landlords have all raised the bar and now provide good quality accommodation with for example, broadband connections and wifi as standard.
Unite and Bournston are just two new companies that now build and rent out a high quality of accommodation for students as well as a secure and safe environment.
They hope to take up the slack caused by the lack of student accommodation Savills research has shown that the proportion of students in university provided halls has fallen markedly in recent years.
WATCH FOR HMO LICENSING RULES
Be aware of the rules on houses in multiple occupation (HMOs) which say that all shared houses in England and Wales which have 3 or more storeys AND five or more tenants now need a license.
And remember that in some areas of England and Wales and throughout Scotland and Northern Ireland, licensing has been extended by local authorities to smaller shared houses - so landlords should watch out for this.
The rules lay down minimum amenity standards like the number of loos and wash basins a property must have, which is why even some professional landlords, put off by the complexity, are leaving the market.
Fees for licenses go up to £1,500 in some areas and there are fines of up to £20,000 for not applying for one.
HAVE A GOOD INVENTORY DONE
Students are often a messy bunch and can be hard on furnishings so you need to get a thorough inventory check done, preferably one from a member of the Association of Independent Inventory Clerks.
If you can, put all the students on a single assured shorthold tenancy in which they are individually and jointly responsible for the whole rent and get parents to be guarantors for the whole rent which will allow you to chase any student (or any of their parents) for part of or the whole rent in the event of any one of them defaulting.
PLAN PROPERTY OWNERSHIP TO MINIMISE TAX
Even before you buy, think carefully about what to do with the house or flat after the kids graduate and how best to structure the ownership of the property to minimise tax.
This is just a rough outline of the key issues. Contact us for more advice.
ABOUT DAVID LAWRENSON AND LETTINGFOCUS
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Copyright 2011 David Lawrenson. This article must not be copied or re-used without the author and copyright owner’s prior permission.
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