Examination of student let returns sees top marks scored

Buy-to-let UK property investors looking for the next move may already be aware that evidence has emerged this year showing a distinct advantage for student buy-to-let over the overall rental market. But now further proof has emerged.

Earlier this year a study by Landlord Mortgages showed that the average rental yield for a student property in the second quarter of 2007 was 6.59 per cent, compared with the non-student average of 5.42 per cent. This wasn't a universal trend - it varied between returns of 9.12 per cent in Durham to 3.4 per cent in Crewe - but the opportunities were clearly out there.

That this is the case has been backed up by further research published today by the buy-to-let mortgage lender Paragon. Its study showed that landlords with student properties in their portfolios enjoyed average yields of seven per cent, compared with 5.6 per cent for those who did not. Better still, it noted, those landlords for whom student lets made up more than half their property saw their yields reaching 8.6 per cent.

On the face of it, these figures from Paragon appear even better than those Landlord Mortgages came up with, which suggests that this part of the buy-to-let sector is getting even stronger.

Paragon Group's chief executive Nigel Terrington certainly believes so. He said: "Strong tenant demand in the student market is driving yields in that sector. If landlords select the right type of property in the right location, the returns from the student market can be extremely healthy."

Mr Terrington added that there were other advantages to having students as well, stressing that the "Young Ones" image was long out of date: "Whilst there will always be a social element to university, students are looking after the property better to avoid losing deposits and incurring costs for repairs and replacements."

He added that legislation and a high quality of care from landlords also meant the quality of student housing stock was much better than it was in the past.

Findaproperty.com came to similar conclusions about the advantages of having students as tenants last month. It noted that more people could be fitted in a house and, (whatever the quality of accommodation compared with the past) students would put up with a lower standard of accommodation than professionals.

Paragon's report mentions a number of university towns where student numbers will go up this year, including Ipswich, which is hosting university education for the first time this year. Carlisle may be added to that list.

Given these opportunities, it could be that, at a time when some are questioning the strength of the buy-to-let market, investments in student rental property have growing potential to bring good returns.

Jim Barnaby is a real estate investment broker and successful property investment adviser delivering research and selected UK and overseas property investment solutions with experience in spanish properties, french property investment, German property, Cyprus holiday homes, Property in Cape Verde, German property investment, cape verde property buy to let property