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August 18, 2016

Get clued up with these top tips for developers interested in student property

Student towns are an excellent option for investors; there’s a steady stream of demand with each new academic year delivering prospective tenants. With A Level results out today and the year’s clearing for university places swinging into action, where’s best for student lets will be on the minds of many.

There are a few key indicators that can help gauge future returns, when investing in student property. According to Christian Faes, Co-Founder and CEO of LendInvest, “landlords need to look beyond simply how big the local student population is. For instance, there are many thousands of students attending universities in London, yet when it comes to rental yields there are far more profitable areas to invest in than the capital.”

LendInvest’s recent research shows rental yields peak in Sunderland, with Manchester a close second, and Oxford outperforming Cambridge in terms of a landlord’s returns.

Why some towns offer better returns than others

Rental yields can vary due to local housing policies. For example in towns and cities where planning for student accommodation has been generous over the past few years students are spoiled for choice. Though demand may be high, the flood of new student properties coming onto the market could have a dampening effect on rental yield, forcing landlords to decrease their rent in order to obtain tenants.

On the other hand, where supply of new student accommodation is being restricted, it’s more likely your student property will find tenants and generate a solid rental income for the future.
So it’s well worth keeping an eye on rental yields when it comes to deciding where to invest in student property. Our buy-to-let index is updated every quarter and you can follow us on Twitter or sign up to our e-newsletter (sign up coming soon) to receive the latest updates and other property market insights straight to your inbox.

Once you’ve chosen your investment destination what are the key things to consider? The team at LendInvest have have put together five best practices for investing in student property and avoiding the pitfalls:

5 best practices for investing in student property

  1. Aim for a property which has at least three bedrooms. Students tend to rent in groups of three to five people. Having more than one bathroom will also be a big selling point.
  2. Location-wise, look for properties with good access to the university campus as well as basic shops and services.
  3. It’s a good idea to ask for a guarantor for each student tenant. That way, even if the student doesn’t pay the rent, you can recover it from the guarantor.
  4. Consider using a joint tenancy agreement, rather than an individual agreement with each tenant. This way, if one tenant drops out or leaves, you will not miss out on rent while the room is unoccupied.
  5. Some universities, like the University of Southampton, compile directories of accredited private student accommodation in the area. You will need to comply with certain standards in order to get onto these directories, but they are a great way of directly reaching suitable tenants.