Landlord Andrew Chell discusses the ups and downs of letting properties to students.
Mention that you let a perfectly nice house to students, and some landlords will start quaking in their boots. And it’s not difficult to see why. Students have got a pretty bad rap over the years, with some commentators seeming to believe that most students are hooligans who just throw outrageous house parties, trash rental properties and never deign to clean.
As a landlord letting houses to students, I’m here to tell you that it’s not all doom and gloom. Although students aren’t always perfect tenants (but who is?), there are plenty of benefits to choosing this target market. In this article, I’m going to bust the myths and talk through the real pros and cons of student tenants.
Tenants are easy to find
Ever had a property that’s stayed empty for months and months, burning through your mortgage payments with no end in sight? Well, wave goodbye to that problem if you let to students instead.
In university towns and cities, affordable shared housing is nearly always in high demand. With a fresh pool of students starting university every year, there’s never going to be a shortage of eager tenants for a quality student house. For instance, in Loughborough, 17,975 students are enrolled at the university, and every single one of those students needs somewhere to live.
Plus, this all means that students are predictable. There’s always a bit of a mad rush for housing after Christmas for example, so you’ll nearly always have tenants sorted six months in advance of the next academic year. You won’t ever be desperately trying to find a tenant at the last minute.
No need for luxury
Students don’t go into second year expecting luxury student digs, so there’s no need to worry about state of the art fittings and furniture. As long as the basics are there and in good condition, they’ll be happy. This can save you a fortune in upfront furnishing and decorating costs, as well as in refurbishment costs further down the line.
This all said, standards for student houses have improved a fair bit in recent years, so you won’t get away with some of the landlord sins of yesteryear. You still want to make sure your student house hits a certain benchmark for quality. Students are professionals in waiting, and deserve to be treated as such. Do this, and you’ll find that students are far less demanding than most tenants you’ll encounter.
A huge benefit of letting to students is that you can collect rent per person, rather than per property. As student properties are nearly always HMOs (houses in multiple occupation), you can easily make a killing. For example, many student landlords convert living rooms into additional bedrooms to earn higher rent from a property. It’s also very easy to find a group of 5 or 6 students who are willing to live together, but with older sharers you’re less likely to find a group of that size. This makes bigger houses a viable investment option. For instance, most of my own properties have between four and six bedrooms.
In terms of cold hard numbers, choose the right city and you could be looking at gross rental yields as impressive as 6.6%.
More reliable than you think
Despite what you may have been told, it’s been shown that students are in fact the least likely of all tenants to miss a rental payment, with only 38% of student landlords ever having experienced a missed payment. This is the lowest for any type of tenant!
When you really think about it, it’s hard to see where the myth of the rent-dodging student even comes from. Students get maintenance loans, meaning they’ve got a reliable source of money coming in every semester. If you’re particularly worried, save yourself the trouble and charge by the term, rather than by the month. This gives you security, and means tenants aren’t going to be slammed with a rent payment as they’re struggling by on the final dregs of their loan.
And if all else fails, they often have the Bank of Mum and Dad to fall back on.
For most students, renting a shared house will be their first experience in the rental market. That means there won’t be any prior landlord references available, so the house you’re renting out will be the first test of their trustworthiness as a tenant.
On top of that, there’s a good chance they won’t be employed, so say goodbye to employment references too. Your normal safeguards won’t work during a student let. This means there’s arguably more risk involved, but in my experience this has very rarely been a problem.
You can solve this by requiring student tenants to have a guarantor, who will normally be a parent. This gives you protection if rent does end up getting missed.
Lack of experience
Lack of experience can occasionally mean houses aren’t as well looked after as they could be. Living independently for the first time is a challenge, and household chores can slip down the priority list. This can mean increased wear and tear, and higher refurbishment costs between tenants.
Similarly, students might be a bit needier than more experienced tenants. Small repairs and maintenance that other tenants can handle themselves will often require a landlord’s attention when letting to students.
The occasional party
I’m not suggesting that house parties never happen. Most of the time though, you probably won’t even be aware they’ve taken place. But of course, occasionally, one can get out of hand and you can end up with property damage, or worse – a noise complaint from one of the neighbours.
Short contract length
If you’re in the market for a long term tenant, students aren’t for you. Whilst older sharers, couples and families might stay in a rented property for several years, the most you’re going to get from the majority of students is a year or two. Of course, if you like flexibility and not being trapped in a long term agreement, this could just as easily be seen as a pro. And, as I’ve already mentioned, you get a reliable supply of new tenants every single year.
Students will expect furnished accommodation
If you’re in the business of renting unfurnished properties out, the initial upfront cost of letting to students might come as something of a shock. Students expect accommodation to be furnished, which increases overheads and the risk that something of yours could be damaged.
About the Author
Andrew CHELL Premier Student Homes is Loughborough’s leading provider of high-quality private-sector student accommodation.