Having the ability to cover the costs of a mortgage, whilst also profiting from rental income has long since made investing in a student buy-to-let property a lucrative option for many.
But along with its benefits, buy-to-let comes with its fair share of both hassle and costs: landlords not only need to worry about finding the right students, maintaining the property and sourcing a team of trusted contractors; but must also consider the large transaction costs, legal fees and House in Multiple occupation (HMO) regulations.
Furthermore, the Covid-19 pandemic has posed significant challenges to the property landscape, particularly for student properties which were largely left empty during lockdowns. This coupled with changes to mortgage interest relief and a surcharge on stamp duty for second homes has left many landlords asking the question: “is buy-to-let still worth it?”
Why Buy-to-Let?
If maintained and managed correctly, any property, including student lets, is an asset and can be a great way to invest your savings as opposed to other methods. Certainly, when it comes to leaving your money in a traditional savings account, rising inflation coupled with abysmally low interest rates means your cash will only depreciate over time.
Many choose instead to invest their money into stocks and shares, which although requires less upfront cost than a buy-to-let, can be risky and volatile. Stock prices can be erratic, rising and then declining significantly over short periods of time, and can fluctuate in times of economic uncertainty (Covid Crash), meaning there is some level of risk.
Buy-to-let on the other hand, carries a much smaller risk and if handled well, can generate a profit large enough to replace employment income. Not only will landlords earn a profit from rental income but are likely to generate capital growth as the value of the property increases over time.
While it might be true that investing in buy-to-let properties has become more challenging in recent years, it still remains one of the best “dry” investments, meaning it comes at a relatively low risk to the investor and as a liquid asset, can be used to secure their future. It’s also one of the only investments whereby landlords can borrow money from the bank rather than cover the full cost themselves.
How to Get the Most from Your Current HMO Investment
For both existing HMO landlords and landlords-to-be, there are many ways in which you can maximise the value of your buy-to-let investment:
Research the Area
As tempting as it may be to snap up a bargain property in an area you have little knowledge of, not doing your research can be detrimental to your profits. It’s essential to know how high the demand for student accommodation is in the areas you are considering and also how many student properties are already currently available.
It's also worth knowing that some areas across the UK have a higher rental yield than others. Areas such as Glasgow and Manchester for example have a high rental yield of around 5-8% whereas in areas such as London and the South East, the average rental yield sits at around the 3% mark.
Finding a balance between rental yield and student population is key to maximising your investment. There are some helpful online tools which can be used to determine the rental yield of a property.
Furnish the Property to Suit Student living
Furnishing the property in a way which is appealing to students is likely to leave your property in high demand. This might mean adding desks to each of the bedrooms or allowing for extra cupboard space in the kitchen.
The kitchen and bathroom are generally considered to be the most important rooms in any house and so keeping these areas functional and appealing to the eye is a great way to entice students and encourage them to take care of your property.
Use Social Media to List Your Property
Your chances of finding students searching for accommodation is higher if you advertise your property across a range of platforms including social media. Invest in high quality photographs and a professional floorplan to make the listing as appealing as possible. The higher the demand is for your property, the better your chances.
Make the Viewing Process More Efficient
Technology has come a long way in assisting the property landscape. Virtual tours for example are a great way to give students a feel for the property beyond what photos can do alone. Being able to view each room from different angles really shows what the property has to offer meaning only those who already have a good feeling about the property will move through the process.
You could also consider using a booking management system to manage viewings and be sure to keep in touch with prospective tenants throughout the entire process.
Choose Responsible Tenants
You of course want to look for students who are financially responsible and able to pay their rent consistently and on time. Whilst many students might not necessarily be employed, that doesn’t mean you should dismiss them. Organising guarantors is a great way to ensure landlords receive payment from a trusted source who can be appropriately credit checked.
Know Your Legal Responsibilities
As a student landlord, you have extra legal responsibilities if the property you rent is a House in Multiple Occupation. These additional rules are to ensure students living in shared accommodation have safe and adequate facilities. Some of these rules include:
- Ensuring proper fire safety measures are in place such as working smoke alarms.
- Ensuring the property is not overcrowded.
- Ensuring there are enough kitchen and bathroom facilities for all occupants.
- Ensuring communal areas and facilities are clean and in good working order.
- Ensuring annual gas safety checks are carried out.
- Ensuring electrics are checked every 5 years.
Landlords will also need to procure a license for their HMO property and can face penalties for not doing so, including repaying up to 12 months’ rent to tenants.
Enlist the Help of a Trusted Property Management Company
Whilst the idea of self-management may seem attractive economically; unless you are prepared to invest a huge amount of time dealing with paperwork and getting to grips with the many HMO regulations, it’s likely to be more hassle than it’s worth.
Putting your assets in the hands of a professional management company will not only save you time, but ultimately protect you against any legal issues which may arise.
Property management companies deal directly with students, managing everything from ensuring rent is paid on time, to sorting any maintenance issues with their own in-house professional team. This reduces the amount of pressure on the landlord and ultimately, gives them the freedom to live wherever they choose without worrying about managing their buy-to-let property.
Property Management from Digs
Using a property management company such as Digs can help you receive better returns from your buy-to-let investment, without the pressure of managing everything yourself.
At Digs, we have vast experience working with HMO landlords in Bristol and can tailor our level of support to your preferred amount of involvement.
So, if you are looking to invest in, or better manage your student buy-to-let, get in touch with a member of our knowledgeable team and discover how we can help. Call us on 0117 930 8750 find out more.
