Room for improvement: Is it time to buy a student home?

With more than a quarter of a million students about to start university, buy-to-let investors are turning their gaze to student housing. Graham Norwood investigates if now is the time to invest

 

It may be holiday season for most of us but many teenagers and parents are working hard to find digs, a hall of residence or even a home to buy for the duration of a college course.

Some 240,000 young people will start university this autumn, bringing the total of students in the UK to 1.7m. The sector is growing, too, despite controversy over fees and loans.

“Student accommodation has outstripped the mainstream housebuilding market by every measure since the downturn - by its growth, rises in value, rent increases, and the number of people it houses,” says Marcus Roberts of Savills’ student accommodation division.

He negotiates with developers and university chiefs to create joint ventures, constructing sophisticated new-build students’ flats on campuses of the major colleges.

But the number of students far outweighs the number of these purpose-built units. “We're not talking about a demand of just two students to every bed - we're talking five, six or seven” says Savills’ researcher Jacqui Daly.

Therefore many colleges are thankful for buy-to-let landlords and parents who buy houses and turn them into student lodging.

The usual route is purchase a terraced house with three to five bedrooms, replace at least one reception room with another bedroom, and let out to students. A lettings agent costs 15% to 20% of the rental income - this sounds a lot but it is tax-deductible and means the agent finds and vets students, collects rent and deals with problems on your behalf.

But owners must be aware of red tape. If you let to five or more students, not in the same family and in a home of three storeys or higher, you may need a local authority licence as a House in Multiple Occupation (HMO), costing £1,250 or more.

There is wear and tear, too - higher with students than other tenants. Your house should include paving instead of a lawn, and easy-to-replace floors, worktops and cupboard doors. A bike shed prevents unsightly (and decor-damaging) bikes in the hallway.

This sounds like hard work but if you get it right the rewards are high.

Mike and Susie Randall from Exeter have a son, Andrew, finishing his second year at Loughborough University. They converted a Victorian terraced house in the East Midlands town in 2009 and are delighted with the result.

"It's clean and safe for Andy and allows peace of mind for us. We're amazed at the rent - £400 a week in term time after the agents' fee is deducted. Loughborough prices are pretty depressed so there's been no capital appreciation, but we intend to keep the house on after Andy leaves next year" explains Mike, a wedding shop owner.

Houses ripe for student conversion:

Lampeter has become one of the most popular colleges in the University of Wales. This five bedroom house could accommodate six or seven students. It costs £215,000 from John Francis

Swansea is a popular university: perhaps because its campus is next to the water and a beach. This house at Brynmill, near the city centre, has five bedrooms and is up for auction with a guide price of  just £90,000 with John Francis








Useful websites:
Get rough ideas of student rents on: http://www.accommodationforstudents.com/; http://www.studentaccommodation.org/; http://www.homesforstudents.co.uk/.