Buying to let on student accommodation (Mortgage Mag)

16.09.2005 A recent report from the brokers, Savills, showed that the supply of student accommodation is not keeping pace with student numbers. This is good news for people who want to invest in the property market. Letting as property to students can be a profitable investment if prices are rising. It can also save on rent money if you have a son or daughter about to go to university.

But investing in the buy-to-let market should not be seen as a short term investment. In order to benefit from it, you should see it as a medium to long term investment of at least five to ten years. Renting a property to students has many advantages. Firstly the population of students is large enough, which leaves you with a large pool of possible tenants. Secondly, the demands of students which are not quite as high as other housing groups. Students are less concerned with furniture and décor and more with having practicable things like bookshelves and tables. This means that less money can be spent on furnishing than if you were aiming your property at the professional sector.
You can save considerable amounts of money if you allow a son or daughter to buy the property you are going to let. You will save money on their rent, but also, because the property is bought under their name, you will not have to pay Capital Gains Tax. This is because the property counts as the student’s principal property. However if you choose to do this you will have to guarantee the mortgage.
Whether you buy a property under your own name, or under your son or daughter’s name, you should pay attention to several factors when choosing the property. Location is of paramount importance to the student market. Students want to live near to their classes as well as somewhere that is close to nightlife and leisure opportunities. When you have found a property which is an area in demand, you should look at the size of the property. Students like living with groups of people, so a three bedroom flat should be the minimum size. Depending on how much your finances will stretch to, a small four bedroom flat may be more economically viable than a large three bedroom flat as it will bring in more money in rent.
When you have found and purchased a property, consider whether you want the responsibility of finding tenants, drawing up tenancy agreements, arranging insurance and collecting rent. A letting agent can be employed to do these services for you and this is a reliable way of ensuring your property is well looked after. Letting agents can charge between 10 and 17.5 per cent of the rental income depending on the level of management service they provide.