Investing in student buy-to-let accommodation can be a lucrative venture, but like any investment, it comes with its own set of advantages and disadvantages. Here’s a comprehensive look at the pros and cons, along with some rental yield examples from various parts of the UK.
Pros of Investing in Student Buy-to-Let Accommodation
- High Rental Yields: Student properties often offer higher rental yields compared to other types of residential properties. For instance, cities like Glasgow and Aberdeen have rental yields of 7.67% and 7.15%, respectively. This is primarily because student properties can be rented out on a per-room basis, maximising rental income.
- Consistent Demand: University towns and cities typically have a steady influx of students each year, ensuring a consistent demand for rental properties. This reduces the risk of long vacancy periods.
- Lower Purchase Prices: Student accommodations are often smaller and more affordable than standard residential properties. This lower entry cost can make it easier for investors to get started and achieve a better return on investment.
- Potential for Capital Gains: Over time, property values tend to increase. For example, UK house prices rose at an average annual rate of 11% in the year to July 2022. This means that investors can benefit from capital gains when they decide to sell the property.
Cons of Investing in Student Buy-to-Let Accommodation
- Higher Maintenance Costs: Student tenants may not always take the best care of the property, leading to higher maintenance and repair costs. Regular wear and tear can be more significant compared to other types of tenants.
- Regulatory Requirements: Properties rented to multiple students often fall under the category of Houses in Multiple Occupation (HMOs), which come with stricter regulatory requirements and higher compliance costs.
- Seasonal Demand: The demand for student accommodation can be seasonal, with peak periods at the start of the academic year. This can lead to periods of vacancy during the summer months when students return home.
- Management Intensity: Managing student properties can be more time-consuming due to the higher turnover of tenants and the need for regular maintenance and inspections.
Rental Yield Examples Across the UK
- Nottingham (NG7): Average asking price £170,278, average rent £1,598, yield 11.30%.
- Manchester (M14): Average asking price £205,102, average rent £1,721, yield 10.10%.
- Newcastle Upon Tyne (NE6): Average asking price £134,641, average rent £1,104, yield 9.80%.
- Sunderland: Average asking price £150,000, average rent £641, yield 5.13%.
- Burnley: Average asking price £117,000, average rent £586, yield 6.01%.
Investing in student buy-to-let accommodation can be a profitable venture, especially in cities with high rental yields and strong demand for student housing. However, it’s essential to weigh the pros and cons carefully and consider the additional management and regulatory requirements. By doing thorough research and choosing the right location, investors can maximise their returns and build a successful property portfolio.
Are you considering investing in student accommodation, or do you have any specific questions about it? If so, speak to our team today.