Should I invest in student buy-to-let property?

27 January 2014


I am interested in buying student accommodation to rent out. Can you advise me on the pros and cons of investing in this sector?


Student buy-to-let property can be a great way to earn income - as opposed to capital growth. The main pro is if you do it right, gross yields (income) can be as much as 10 to 15%.

The downside, though, is you can't get your money out quickly as it can take months to sell and student lets typically require lots of regular re-decoration, new flooring, upgrading of kitchens and bathrooms, so they can feel like a 'money pit'.

Despite students using the property during term time, most landlords still charge for the full year but, as with any let, there are security and insurance issues that need to be covered when the property is empty. And you need to make sure your tenants can always pay their rent as empty properties are costly.

Supply and demand

When choosing a property from a buy-to-let perspective, this is a relatively easy task as most will want to be within a mile of campus and, as they tend to be city-centre locations, you can either buy 'ready- made' lets or a bargain 'fixer-upper' to improve returns.

But demand and supply can vary over a 15- to 20-year investment, which is an advisable timescale to ride out peaks and troughs in the market. Some student landlords have suffered from a drop in demand due to bespoke student accommodation being built on or near the campus; other landlords may suffer if student numbers fall due to increased fees. Typically in the areas good for student lets, there are few others who want to rent there.

From a regulation perspective, your let might be classed as a 'Home in Multiple Occupation' which may need a licence adding to costs, as will the 100-plus rules and regulations you need to abide by.

Student buy to lets can be profitable but make sure you understand the tax implications to your income and assets of adding extra wealth through bricks and mortar. Understand the rules and regulations of letting and make sure you and your property are approved by the student accommodation office.