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How to make a profit renting out student accommodation By Simon Thompson |
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It all sounds so tempting to potential buy-to-let student property landlords - cheap property, guaranteed yields and a never-ending supply of quality students who will look after your investment.
But is it all too good to be true?
The simple answer is yes. And no.
The fact is that many new buy to let investors are being attracted to the student rental sector by property developers and their glossy adverts which offer purpose-built student accommodation for a minimal sum - sometimes as little as £40,000 - with a 'rental guarantee' for a specified number of years.
Buy to let student properties – what you need to know
This means the investor doesn't have to get involved in the day-to-day management of a student buy to let property and, instead, only has to sit back and wait for their cash to come rolling in without having to do anything.
It's important to remember that student accommodation has undergone a massive transformation in recent years and most student properties are no longer the poorly maintained, run-down student properties of yesteryear.
Today, many students live in purpose-built accommodation that have en-suite rooms and are found either in the city centre or very close to their campus. Many also have a cafe and a gym.
This means that developers can offer potential investors the opportunity of buying a studio flat, or a 'pod’ as many are known, with a promised 'rental guarantee' for a few years, the property management taken care of and the supply of suitable student tenants also dealt with.
Profit with student pods for sale around the UK
Pods are being advertised around the UK with prices ranging from £55,000 to £82,000 with guaranteed returns of 8.9% for five years or 35% net over five years.
Those are very impressive figures for buying and renting student accommodation but anyone wanting to enjoy those returns will probably have to be cash-rich because lenders are generally reluctant to offer a loan against them.
Potential investors should also be wary of buying student accommodation 'off plan'.
This, says Stuart Law of Assetz property investment, carries two risks for the investor.
Risks for buying and renting out student property
He says: “What if the developer doesn't have the block managing experience or the development isn't finished?”
Some also question the 'rent guarantees' from developers with critics saying the figures are usually overstated and often don't materialise.
To make this situation worse, some investors may well be subsidising their own rent yields by paying more for the property than it is worth.
It's also worthwhile for potential student pod investors to consider an exit strategy since they will be restricted from selling the property on the open market - to a first time buyer for instance - and will instead have to sell to another investor.
Do the homework before investing in student rental accommodation
As with all buy to let property investments, especially for anyone wanting to invest in quality student accommodation for rent, the key to success is for the investor to do their homework properly.
There are very good yields to be enjoyed in the sector but investors are potential landlords and will need to put together a business case for their investment which will also calculate returns, yields and potential void periods for when no-one is living in the pod.
Informative websites such as studentaccommodationforsale.com are often a very good place to start.
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Landlords warned - prepare for more regulation |
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Landlords in England are being warned that they should prepare for more regulation after the government published a consultation.
The warning comes from Tim Miles who is a partner at law firm Clarke Willmott.
He says that the Government is cons |
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Research reveals that 2017’s rents fell in real terms |
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The rents being paid to landlords in all parts of the UK fell in real terms during 2017, research suggests.
The findings from HomeLet reveal that rents in November rose by 0.7%.
That's the 11th straight month that rent increases have fallen beh |
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Rents for the UK’s rental properties rise by 2.1% |
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The average rent for a buy to let property grew by 2.1% in the year to September, an index has revealed.
The figures from HomeLet show that the average rent now being paid is £927 every month.
For landlords in London, rents rose by 1.9% o |
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Landlords start exiting the buy to let sector |
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One leading firm of letting agents is warning that buy to let investors are beginning to exit the sector.
The warning comes from Belvoir who say that while the numbers of landlords leaving is not huge, there is a trend appearing.
The firm's chi |
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Landlord confidence takes a knock |
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Despite the prospect of high yields and profitability, a survey has revealed the landlord confidence around the UK has fallen.
The findings from BM Solutions looked at all the key indicators for the second quarter of 2017.
They say that the lev |
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Landlords 'don't know what tenants want' |
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Landlords in the private rental sector are out of touch with their tenant’s wants and needs, according to new research.
The findings from an online letting agent revealed that tenants are clear most often about what they want and t |
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