Letting Properties as Student Homes – The Benefits & Risks
It’s becoming more and more lucrative to let to Students – especially due to the lack of accomodation available and boom in the market but what are the risks, insurances that you need as well as the policies that are available for landlords
It’s becoming more and more lucrative to let properties to students. Thanks to an increased demand for student housing and a lack of available accommodation, landlords are in a great position. But, what are the pros and cons of letting to students? Are there risks and are they worth it?
Is it worthwhile?
At the moment, demand for student lets is at an all time high. After many students opted to defer their university places in 2020 due to the pandemic, universities are now seeing a surge of students, looking for places to live. The problem has gotten so bad that some universities are putting students up in accommodation that is miles away from campus. Students attending the University of Bristol have had to commute to lectures from as far away as Newport.
The UK is a much sought after place to study. With 1.8m students, housing them all is a big challenge. The huge demand has caused the student housing industry to boom, with rent increases on average at around 3.5 percent each year.
It’s clear then that there’s a need. And if you have a spare property, you may be considering turning it into a student property. Below, we take a look at some of the benefits and risks involved.
Important note: A property that is let to three or more unrelated tenants could be considered a House in Multiple Occupation (HMO). If this is the case, you will need to apply for a licence from your local authority, as well as adhering to the relevant regulations.
Benefits:
Letting to students can be a great investment. Typically, students will have lower expectations than longer term tenants when it comes to things like decor or furnishings. Meaning you won’t have to spend more on sprucing up the property. They are mostly easygoing and undemanding tenants to have.
Additionally, with students only studying for three years on average, you won’t be tied into any long term contracts.
If your property is close to a university campus, it won’t be difficult to find tenants, with a steady stream coming through each year and a high demand.
And finally, in student properties, you can charge rent per room, often leading to higher returns.
Now, onto the risks.
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Risks:
Unfortunately, not all students will be the model tenants you’re hoping for. Some landlords have sadly been met with a host of noise complaints and damage. You can’t reference or credit check students, so you don’t really know what you’ll be getting.
Financial instability is a concern, too. Landlords will typically ask for a guarantor, but that doesn’t necessarily stop them having to chase for rent payments each month. And, if a student can’t afford to pay, you could be left out of pocket.
The property will also be left vacant for most of the summer, while the students are on holiday. It’s wise to insist on a 12 month contract.
Generally, you’ll be spending more on maintenance and repair, with a lot of people using the house’s utilities. Many landlords choose to refresh the decor when students move on, which adds up if you’re doing it every year or so. However, a lot of these costs can be offset against not needing to provide more expensive decor or furniture.
Private companies have noticed the demand for student housing and many cities have seen planning permissions granted for purpose built, private accommodation. These brand new buildings with lots of amenities can be more attractive to prospective students, which may affect demand for standard private let housing.
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A few tips
If you’re planning on letting out your property to students, the first thing you should do is undertake a detailed property inventory, covering all belongings and furniture, as well as their condition. Keeping reliable written records in general is advised.
You’ll also need to have robust risk assessments for fire safety. The Housing Act 2004 and Regulatory Reform (Fire Safety) Order 2005 set out a property owner’s duties in relation to fire safety in HMOs. A proper risk assessment doesn’t just help you avoid liability, it can also save lives.
Finding the right insurance cover
Standard homeowner insurance policies aren’t enough to cover the additional risk imposed when letting to tenants. Extra protection is necessary to avoid and mitigate potential loss. Many student landlord insurance policies will include cover for elements such as:
– Buildings and contents
– Unoccupancy cover
– Property owners’ liability cover
– Loss of rent and temporary accommodation
– Theft, malicious damage or vandalism by tenants
– Replacement locks
– Accidental damage
Letting to students can be a worthwhile investment. It’s a lot of work but, at the end of the day, you’ll have a steady stream of potential tenants that don’t require much. Provided you have the right insurance cover and risk management in place, you’re in a solid position to begin opening your property up to student tenants.
For advice and further information on insurance for student landlords, speak to [broker_name] on [broker_phone]. Our experienced, friendly advisors can help answer your questions and put your mind at ease.
