Student buy-to-let smartens up

Now the university year is in full swing, the latest studies of the state of the student segment of the buy-to-let home market have been carried out. The news which has emerged is of changes to the nature of the market which landlords need to be aware of if they are to stay ahead in what is an increasingly lucrative business.

That it is lucrative is not in doubt, with research published earlier this year by Landlord Mortgages showing average student buy-to-let yields were 6.59 per cent, compared with 5.42 per cent for the rest, while buy-to-let firm Paragon found that landlords with student lets on their books averaged yields of seven per cent, while those who did not only saw yields of 5.6 per cent.

So far this year, real estate agency Hamptons International has found that not only is demand strong, but also restrictions on supply have seen an increase in the proportion of students renewing their tenancies, a phenomenon at odds with the rest of the buy-to-let market, hotproperty.co.uk reports.

In addition to this, there is increased demand for quality, far from the outdated stereotype of the hit comedy The Young Ones. Rather than dirty digs with rising damp, there is an increasing desire to live in a high standard of accommodation. "Students are increasingly savvy when it comes to getting in early to secure their ideal property," said Hamptons spokesperson Melanie Williams.

She added that students were willing to pay a good rate of rent for properties, which were well decorated and had modern kitchens and bathrooms.

But if some are failing to live up to the image of Rick, Neil and Vivian, other students are taking matters a step further. Research by Abbey National has found that students and their parents are not just being the customers of buy-to-let but are increasingly joining the ranks of owners. The bank found that 88,000 students already live in their own place while studying at university, a quarter of whom are living in places that their parents have bought for them to stay in. The new buy-to-let investors, it seems, are either Mum and Dad, or the students themselves, whose ownership of a property in a university town, either alone or in partnership with friends, opens up their own chance to be landlords.

Commenting on this development, Abbey's head of mortgages Nici Audhlam Gardiner said: "Britain's student population continues to be a source of income for buy-to-let property investors, many of whom are parents of the students or the students themselves."

She added some advice for these new investors, should they take out a buy-to-let mortgage: "The key issue with any mortgage, but a buy-to-let one in particular, is affordability. People considering it need to make sure that they can afford the mortgage payments plus any maintenance costs, service charges and down-time between tenancies that they will also need to cover."

But while these new investors get their own advice, existing buy-to-let landlords looking to get into the student market need to be clued up as well. The message is clear that students want a better quality of decor and facilities than was perhaps once the case. Moreover, if the landlords don't meet that demand, there are others - including entrepreneurial students themselves - who will. As ever, knowing the market well is the key.

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