Would you rent your first BTL property out to students?

by Readers Question

13:17 PM, 3rd January 2015
About 4 years ago

Would you rent your first BTL property out to students?

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Would you rent your first BTL property out to students?

I am about to buy my first Buy to Let and I was thinking that it will be good to rent out to students by the room as it might end up paying me well, no council tax to pay and renting by the room sometimes means that the house is never empty (always having a tenant) and I might never have to renovate the entire house at one time.

Its a three bedroom with a living room, I could even convert the living room into a big room and rent that out as well. It has two toilets so it will be two to one.

Please, what are the ups and downs of renting to students?

Many thanks for your help!

MMCyoung



Comments

Neil Patterson

13:24 PM, 3rd January 2015
About 4 years ago

Hi, I know lots of readers that do let to students very successfully and they tend to specialise in this market as the yields can be very good.

There are obviously risks, but these can be mitigated through hard work on your research, due diligence and vetting of tenants. I know one reader that only lets to girls.

A good place to start is to contact the local University and see what requirements you have to meet to be placed on their recommended list.

If this investment is to be more of a passive hobby I would reconsider and go for a standard single person or family let type of property.

Paul Shears

18:12 PM, 3rd January 2015
About 4 years ago

This is not my area but I do observe this market from close quarters. My understanding from a number of agents is that the downside is that there is certain to be much more work every single year. One agent who handles a lot of these types of properties, told me that they will wreck the washing machine every year. This can be managed of course by underwriting the risk but it's not something that affects most landlords to this degree (No pun intended).
If you want maximum returns for more work then it offers benefits.
You will have to be stoic about the stupid problems that you will certainly encounter and the frequency with which they occur but you are very likely to make more money all other things being equal.
Personally I wouldn't fancy the challenge of finding reliable tradesmen more often than I do in a less risky part of the market.
Making a high capital gain at the same time is very unlikely.
To sell you may need to factor in a major overhaul unless it goes to a landlord in a similar line of business.
Generally speaking you can't have it both ways. More work can mean more profit.

MyMini Crib

21:05 PM, 3rd January 2015
About 4 years ago

Reply to the comment left by "Neil Patterson" at "03/01/2015 - 13:24":

Thanks Neil,

I will contact the school and look into this further as this is something i definitely want to get into!

MyMini Crib

21:09 PM, 3rd January 2015
About 4 years ago

Reply to the comment left by "Paul Shears" at "03/01/2015 - 18:12":

Thanks Paul,

I really want to shift into the property market, so if the hard work is required to make more money, i am up for it. Now i am thinking, i need to get a property that is really close to me, so i can monitor it. also vetting is a very good idea, renting the somewhat mature students.

Still trying to wrap my head around breaking the washing machine every year, what could they possible be doing to it??

Thanks Again!

Paul Shears

23:48 PM, 3rd January 2015
About 4 years ago

Reply to the comment left by "MyMini Crib" at "03/01/2015 - 21:09":

Hi MMC
Well you have two main problems here.
Firstly there are the immature clowns who just don't care and secondly there are the more genuine types who just don't realise what they are doing.
You just have to accept this to a large extent.
It may be that some component escapes damage in your proposed investment but if you are the sort of person who can't suffer fools gladly (Like me) then I would suggest lowering your financial aspirations. Alternatively a much stronger & younger person than myself can mentally distance them selves from the idiot student fresh out of their parents home who thinks it is fun to kick a football up against the lounge window from the inside. I haven't had this but I know of a man who has. This would be quite a trivial matter even if they smashed the window but there is simply no cure for "Dumb" and the type of experience will repeat inevitably.
If you can, try to talk to the sort of person that many landlords use to share the burden of running a property. I'm talking about a maintenance chap or a cleaner who goes in at the end of the year to clear up your trashed rental property prior to trying to persuade the next lot of students to rent it. Or the chap that needs a large open back lorry to clear out the trash including 350 empty bottles of beer & wine before the cleaners can start. It can be pretty shocking stuff and you will have to accept it but, proving you get all your ducks in a row, this will still produce a higher return that I get. I make 5.6% gross plus capital growth but I'm at the opposite end of the market from a student let. There are houses structurally identical to mine nearby that only the bottom end of the market would want to spend a night in that make more money than I do.
Further to the above you have the increased risk of getting a "Really bad tenant" experience that can hit you for £10K upwards so very easily.
My own view is that you have to know yourself and make the business reflect what you want most of all.
If it's maximum money then this will come with more pain.

Barry Fitzpatrick

12:55 PM, 5th January 2015
About 4 years ago

I own a small number of student lets, and I use a local letting agents to manage them on a day-to-day basis. I do this because:
a. they are used to handling students and the problems that arise
b. the have close contacts wit the local Uni's & colleges
c. have a High St presence for marketing purposes (properties are marketed from December for the following academic year).

The turnover of Tenants is high typically annually so you have to factor in professional carpet cleaning, professional oven/hob cleaning, and general house clean at the end of each tenancy (plus where appropriate a gardener). (all charged on to the students - make sure their Deposits will cover this at least).

Also some Local Authorities require student lets to be licensed and if not already a student let for planning permission to be granted.

Only a few lenders will give mortgages on Students lets, and then more often than not is ha to be on a Joint Tenancy (so there is no advantage to the "always occupied" comment).

You need to factor in that you'll probably only let the property for 11 months (possibly 11½ months) per year i.e. you'll have a 1 month void every year. The market for student lets is very peaky - buy at the wrong time and you could be left with a very long void period.

I've found that keeping the property in a good condition results in the property being looked after by the students (if its dirty/scratched/scruffy then a bit more dirt/scratches/etc don't matter attitude sets in), but avoid all male tenants as well. I only let to 2nd/3rd year students as the novelty of living away from home for the first time is behind them, and they are a little more worldly wise.

As the properties are let furnished I chose solidly built furniture rather than the cheapest; not does it last that bit longer it tends to looks better for longer as well. Lay polypropylene carpet as they are more stain resistant and easier to clean. This all adds to the impression of a quality condition of the property.

Mike W

13:27 PM, 5th January 2015
About 4 years ago

Hi MMC,
I don't think your title question has been answered. You have received some very good experience advice. But as someone who has rented to professionals and students, I would never learn about the rental market by renting to students with my first buy to let. You hear about high GROSS returns from students but don't hear about the high costs and hastle which results in NET average returns. If you want a NET average return with an opportunity to learn about the market and how to manage your property well stick to professionals.
With respect, some of your comments highlight a degree of naivety. Letting by the room is possible but check with your lender (if you have one). That also means you don't just have one agreement to manage. And of course students have no money, something you find out very quickly. Guarantor agreements? Students also drop out of uni too and go home. If not a student then Council tax comes into play... The stupidity of young people is amazing as others have already commented. And of course as far as parents are concerned little Jane or little Johnny can do no wrong. You will be a bad greedy landlord. As for using the lounge as a bedroom... Interesting but does it get you more money? Or are students intelligent enough to see what they are getting? Once they can compare - realise their friends have got better places with a lounge to watch telly and have a party - then they are off : high turn over.
The successful student landlord can manage this but it is hard work. One thing I have learnt is that character judgement is very difficult. Up market kids can be worse than those from the poorest areas, and a girl's parents can be very blind.
If you go into it be prepared.

MyMini Crib

17:47 PM, 5th January 2015
About 4 years ago

Reply to the comment left by "Paul Shears" at "03/01/2015 - 23:48":

Good advise paul!

I think you have given me both extremes. Students can be very silly. I will just have to effectively screen my tenants and maybe even get their parents to sign on the rent as well!

Thanks again

MyMini Crib

17:51 PM, 5th January 2015
About 4 years ago

Reply to the comment left by "Barry Fitzpatrick" at "05/01/2015 - 12:55":

Wow, thanks Barry!

a lot to learn. I will put your advise on my tick sheet 🙂

MyMini Crib

17:55 PM, 5th January 2015
About 4 years ago

Reply to the comment left by "Mike W" at "05/01/2015 - 13:27":

Thanks Mike,

I am very new to this, this is why i am seeking advice from people like you 🙂

Thanks again

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