Renting a house is a popular choice for university students in the UK. This attracts landlords who are looking for a new investment. Across the globe the UK is the second most popular destination for students studying overseas; that’s a lot of potential tenants coming in every year.
We want to give you the lowdown on buy-to-lets for students. Is now the time to invest, while the popularity of university education continues to boom? If you’ve already made the decision to dive in, what’s your first step?
What is a student buy-to-let mortgage?
If you want to rent your property out to students, you’ll need to apply for a student buy-to-let mortgage. You might invest in large houses you can restructure, or purpose-built student accommodation, such as flats.
A study by Paragon Bank revealed student buy-to-let investments achieve higher yields compared to other types of buy-to-let. Though it depends on property type and location, high yields are important for landlords and investments. We talk more about the benefits of student buy-to-lets here if you’re interested in learning more.
The right time to invest?
Now more than ever, there’s a growing demand for student accommodation in university towns and cities. As long as university education is still in demand, it’s highly likely that demand will always be there for those locations.
Currently, only 13% of UK landlords let to students. However, landlords who focus on student lets have a strong desire to grow their portfolios, particularly those with large portfolios.
If you’re thinking about investing, now might be the right time - there’s plenty of room in the market, but you want to get in there before the window closes up. Of those surveyed by BVA BDRC on behalf of Paragon Bank, 33% said they will likely buy a student buy-to-let property in the next 12 months.
How do I get started?
If you’re thinking about a student buy-to-let, lenders will look at a number of factors before granting you the application.
Your rental income project will need to cover the mortgage by at least 125%, for example. Deposits may also be higher for a buy-to-let mortgage. Different lenders will offer different deals when it comes to mortgage applications.
A qualified mortgage adviser will be able to help research and provide advice on the right lender to suit your individual circumstances. This will help you make the most out of your investment.
Other things to consider
Stamp duty
Investing in any kind of buy-to-let or second has a stamp duty charge of 3%, on top of any standard rates of tax.
House in multiple occupation (HMO) legal requirements
As student buy-to-lets are often HMO tenancies, you’ll need to make sure you know the requirements and responsibilities that come with this type of tenancy agreement. They may differ from a standard buy-to-let mortgage. You’ll also need to go to your local authority to apply for a licence so you’re officially registered as an HMO property.
A student buy-to-let can be a great investment. You just need to make sure you’re ticking all the boxes so you know it’s the best investment for you.
Expert advice for student landlords in Newcastle
Providing expert mortgage advice is what we’re here to do, so get in touch and see how we could help. To book a free initial no-obligation appointment with a mortgage adviser in New castle, give us a call on 0191 0188229 or send us an e-mail.
There is no guarantee that it will be possible to arrange continuous letting of the property, nor that rental income will be sufficient to meet the cost of the mortgage.
Your property may be repossessed if you do not keep up repayments on your mortgage.