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Student life is good for buy-to-let

As a specialist buy-to-let mortgage broker, Buy-to-let Direct is dedicated to helping brokers and landlords find the best mortgage solutions across a wide range of different property and tenant types. So, it is important that we maintain a comprehensive knowledge about specialist subsectors of lending in the buy-to-let marketplace and understand the pros and cons of particular property investment choices.

Recently, Paragon Bank published an interesting report on student letting which highlighted some of the reasons this area of buy-to-let is popular with the UK’s landlord community.

Rental yields

One of the key benefits of renting to students is that rental yields can be higher than average, particularly when properties are let to multiple tenants generating more rental income. According to the Paragon report 79 per cent of landlords said that rental yields were a factor that made student lets appealing. It also showed that last year in Q3 2020, the overall mean rental yield was 6.6 per cent for a student property portfolio, compared with 5.6 per cent for a non-student portfolio.

Location

University locations are clearly a hot spot for good rental yields and those with a single university and student population below 25,000 seem to fair best. The top yielding university location was Swansea with a rental yield of 9.56 per cent, followed by Hull (8.68 per cent) and Plymouth (8.41 per cent).

Landlords looking to invest in student lets can research different university locations to identify those where property is more affordable and demand is high, to increase their chances of a good return on investment.

Opportunity

Perhaps surprisingly and despite the financial potential, only 13 per cent of landlords currently let their properties to students which suggests that there could bean untapped opportunity for savvy property investors.

Although Covid-19 has had a short term impact on the demand for student accommodation with online learning and living at home being more commonplace during the pandemic, applications for university places increased in 2021. And as students return to campuses, landlords should be able to rely on a steady and predictable demand for student digs.

This website is aimed at mortgage intermediaries and investment professionals only and is not intended to be relied upon by borrowers or investors.

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The Business Mortgage Company Services Ltd is authorised and regulated by the Financial Conduct Authority (No. 302764) to transact regulated mortgages and registered as a Consumer buy-to-let arranger. The FCA does not regulate some investment mortgage contracts.