January 6th, 2017
Investing in university towns has never been so rewarding, with landlords being able to earn up to 6.9% in returns, with expenses.
The UK student accommodation sector is one of the fastest growing sectors in the market. Knight Frank reported that since 2014 it has grown from £30.9bn to £42.5bn. That is a whopping 37%. Rental growth and strong demand, from both domestic and international students, are the main causes of this impressive growth.
In a university town, each semester there are new students entering college and looking for a place to live. Due to the high demand for student accommodation, rent prices steadily increase every year. As a landlord, you won’t have much time to spend marketing the area. However, that is not an issue since university towns are filled with attractive amenities such as popular events, food courts and shops, and those market the property for you.
High property prices in the South of England cause cities such as London, Oxford, Reading and Brighton to become far less attractive to landlord investors. Therefore, investors tend to look at university towns in the North of England, as they are proven to be more lucrative.
What are the best cities to invest in?
Holding first place, as stated by Property Partner and LendInvest data, Sunderland provides the best returns of approximately 6.9% of net annual yield. It is one of the cheapest places to invest in, compared to the rest of the student towns in the UK, with average property prices rocking as low as £65,200.
Up next is Teesside (Middlesbrough), offering a combination of strong tenant demand and low investment costs. With an average net annual yield as high as 5.9% and an average house price of £56,272, it is certainly a great location to invest in.
Birmingham comes in third place. The average house price is estimated at £116,732, offering an average net annual yield of 4.5%. Despite the average houses in Birmingham being higher than in Sunderland and Middlesbrough, they offer a higher rental income per month and house prices are still considered lower than in most university towns.
Manchester, although ranking at number 6, remains an attractive location to invest. Manchester has approximately 95,000 university students, being the city with the second largest student community in the UK. Properties in Manchester are more affordable than in many other university towns, with an average house price of £135,174 and providing an annual yield of 4.4%.
Tips for letting to students
Do your homework. Always do some research on the location of the property. Student properties with good access to the university campus and near local stores, are usually preferable to students.
Use a joint tenancy contract rather than an individual one. If one of the tenants should leave, you won’t lose out on the rooms that are unoccupied.
Look for properties with three bedrooms or more. Students usually rent in groups and thus the more rooms and facilities, the better.
The best time to start investing is in January and onwards until August/September. Students will begin looking for a property early on before starting their next academic year.
Fully furnishing the property is a great selling point. Most students are looking for fully furnished properties to save them the hassle of buying necessary furniture and appliances, as well as saving them money. Initially it might seem expensive to furnish the property, however it greatly boosts the value and attractiveness of the property, as well as it generating more revenue in the long-term.