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Student property investment – is it a good decision?

The number of applications that universities have been receiving over the last few years has been fluctuating. This month, UCAS blamed Brexit for a 4% fall in the number of university applications it has received for 2017.  As thousands of students prepare to start their degrees, we ask whether student lets are a good investment?

This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

Options for student lets

Typically you have two options. The first is purchasing a property (normally a large house) which can then be divided up into numerous bedrooms. This is known as a House of Multiple Occupancy (HMO).

HMO’s are popular amongst student let investors as they offer more options if the market conditions change. If student numbers fall in the area, the house could be let out to professionals or even changed back into a family home.

However, HMO’s have stringent rules and regulations governing them. Each local authority has its own set of rules on what type of HMO they permit. Some HMO’s need to be licenced and there are strict fire safety requirements for HMO properties.

The second option is investing in a purpose built student accommodation. These type of properties are typically found in city centres. They offer a better standard of living for students and can deliver a higher yield.

Pros of investing in student lets

  • Reduced periods where the property is empty (landlords can issue 12 month contracts)
  • If the students like the property they could stay in it for the duration of their course (2-3 years)
  • Landlords typically ask for guarantors (usually the parents act as guarantors)
  • The contract typically covers the whole accommodation. So if one person can’t or won’t pay, the others are liable to cover to their share

Cons of investing in student accommodation

  • It may not be possible to get a buy-to-let mortgage on a purpose built student let (a commercial mortgage may be your only option if you are not a cash buyer)
  • You may be required to get a specific type of buy-to-let mortgage for an HMO property
  • Tough rules govern the rental of HMO’s
  • Selling on a purpose built student accommodation may be more difficult as there is a narrower buyers’ market, in comparison to HMO’s

If you are planning to invest in a student let, ensure you get the best mortgage. We are happy to discuss in detail your different options and to provide a competitive, independent quote. 

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