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Renting to Students

Have you ever thought about renting your property out to students?  London is renowned for its excellent universities and students flock here from across the world, so demand for smaller rental accommodation is high and growing rapidly. And with a continuing shortage of suitable accommodation, this is very much a landlord’s market. University College London, King’s College London, Imperial College, The London School of Economics – these are just some of the prestigious educational establishments that attract top students and our lettings offices find homes for many who want to be close to these and other popular London universities.

Students make excellent tenants, despite their reputation.  With high tuition fees and living costs, most students are serious about their studies and probably more mature and responsible than many of us realise.  And in uncertain economic times, students are the ultimate recession-proof tenant.  They’re investing in their future and they want to complete their education, regardless of the ups and downs of the wider economy – so demand is consistent and only ever increases. And with parents acting as guarantors, a landlord is assured their investment will be looked after or any damage will be covered by the parents. We all know what parents are like when they visit, they do check, so it really is a win-win for landlords.
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Student finances

Students are usually a good financial proposition – partly because they are usually funded by either their parents or student loans so have a reliable source of income. Parents usually act as guarantors, which protects the landlord against non-payment of rent as the guarantor becomes liable if the student gets behind with their payments.

International students

Students from overseas tend to have good budgets and will usually pay 10 to 12 weeks’ deposit and rent in advance for 6 – 12 months. They will often stay for the entire three or four years of their course, giving landlords a continuous income, with no voids during that period.

What are students looking for in a rental property

A rental property aimed at the student market should be as near to a good university as possible where there is strong demand.  And for sure it must be near to a Tube station. They search in most areas from prime central like Knightsbridge and of course around the main London university areas around Tottenham Court Road, out to Stratford in the East, Ealing in the West and Colindale in the North. So long as it is close to transport, then it will equally appeal to students as well as a professional tenant.

Presentation and furnishings need to be of a good standard, particularly if you want them to last. Today’s students have very high expectations and with some paying as much as £1,000 per week they are no different to corporate professionals.  Old furniture will simply no longer cut it and the property must be fully furnished and dressed to attract them.  There is a lot of choice out there and its important a property stands out to get rented whether it is a student or by a corporate.

The trick is to present the property in the best possible way and then you have the best of both worlds – it could be rented by students or by professionals. The reality is that property is an investment and as such it should not matter who you rent to, the key is that it is rented to a good tenant at a good rent.

Investing in student accomodation – the options for landlords

Renting out rooms separately to students 

Many landlords buy a house and then rent each room out separately to individual students, with each student individually responsible for all the rent and any damage. The students may already be friends or they may make contact through a university accommodation office.

The advantage of this option is that overall, the rental income will be greater than for a house that is rented out to a single tenant.   To save money, students may be happy to use a living room as a bedroom which will further increase rental income. A three bedroom property occupied by four tenants, one of whom is using a living room as a bedroom, is the most common scenario.

The downside though is the condition – with numerous people living there and many at home during the day studying, there will be much more wear and tear than usual. The new Replacement Furniture Relief (which replaces the 10% Wear and Tear allowance) may alleviate this though as it allows landlords to deduct the actual costs of replacing furniture and some household contents from their rental income before income tax.

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Another disadvantage is that the property may become a House in Multiple Occupation (HMO).  This is the case where a property houses three tenants or more, forming more than one household.  If a house has five or more tenants living there as more than one household and over three floors or more, it is a large HMO and will involve additional standards that must be met by the landlord who will also need to obtain a special licence. Having an HMO incurs quite a lot of extra costs and is something we would steer clients away from.

Students sharing a rental property

We also see a lot of students looking to rent either studios or one bedroom flats on their own, or two bedroom flats to share. This is the same set-up as you’d expect with professional sharers except that the rent will usually be paid in advance and the parents will act as a guarantor.

Student accommodation investment funds

The bulk of students we deal with rent either studios or one bedroom flats on their own, or two bedroom flats to share. This is the same set-up as you’d expect with professional sharers except that the rent will usually be paid in advance and the parents will act as a guarantor.

There are plenty of ways to benefit from the London rental market for student accommodation and if you would like to discuss buy-to-let or making your property ready for students, including which parts of London are experiencing highest demand, please call us on 020 7319 9780 or email us.

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About the Author

Established in 1958, Benham and Reeves is one of London’s oldest, independently owned property lettings and sales agents.  With specialism in residential sales, corporate lettings and property management in prime areas of London, the company operates from 19 prominently located branches and 8 international offices.

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