As a whole, the buy to let sector has continued to prove itself as a successful area for property investment, with student tenancies topping the figures for buy to let performance. The latest figures from Countrywide Residential Lettings have shown that buy to let landlords currently receive the best returns when they let properties to groups of students. Student accommodation has become the highest performing asset class in recent years with buy to let yields for UK landlords averaging between 7% and 9% per annum.
During 2013, monthly UK rent increased on average by 2%, but despite this the average buy to let yield for UK landlords is down 0.1% compared to 2012 figures, now sitting at 6.1% gross. According to the CBRE Student Accommodation Index, student letting figures have surpassed the national average with property returns reaching heights of 9.95% during September 2012-2013. These figures are higher than those found by the Investment Property Databank (IPD) for office, industrial and retail property for the third year running, even without capital growth for residential property being considered.
A study by the National Landlords Association has found that there are extra financial benefits associated with letting property to students, with student tenants appearing to be the most reliable for paying rent on time. 38% of student landlords experienced arrears last year, compared to 59% of landlords renting to blue collar workers and 71% of those who rent to benefit recipients. Even landlords who rent to families experienced more arrears than student landlords, with 40% of landlords not receiving payments on time.
It is possible that the increasing proportion of tenants who are students in the current climate is a result of the government’s help to buy scheme, which is allowing families and professionals to step onto the property ladder when they previously have only been able to afford to rent. The continual demand for student properties to let creates secure and constant income for landlords, especially in areas with renowned universities.
Peter McDermott, Director of Go Global Investments, described investing in student housing as a ‘hands-off’ process due to services which property management companies offer. He said:
“An investment in student housing generates far fewer headaches than your average buy-to-let, largely because the entire process is hands-off. The professional management company finds the tenants, maintains the building and uses economies of scale to drive down running costs. All the investor has to do is watch regular rental returns appear in the bank account”.
Whilst student lettings are currently providing positive figures for buy to let landlords, they are not always an easy win and require the investment of time. Many student tenants are living away from home for the first time so will have plenty of queries and need support with all aspects of renting a property. Here is where a property management company like CPS homes can collaborate with you to help you build a dedicated relationship that makes letting to students a rewarding experience.
If you are looking for a buy to let property, CPS homes can help with all stages of the process from investing in property to managing your lettings. Get in touch with our team today for professional information and advice.