Buying to let – better by degrees
When you buy to let – as in any kind of business – you look for margins. You need to pay off a mortgage and maintain a property, yet still turn a profit. But sometimes the rent your tenants pay may just barely cover your mortgage and other expenses. It’s no good just putting the rent up – your tenants will move if they can find a better deal elsewhere.
A recent study by Zoopla has made it easier to find that edge – if you happen to be renting to students. Having a great university in a place with otherwise reasonable property prices is just the touch of magic dust a landlord is looking for.
Zoopla’s research found Scotland to be a gold mine of wide profit margins, with relatively low property prices meeting some of the UK’s most sought-after universities. Edinburgh topped the tables with a 6.11 per cent profit yield, joined in the top five by Aberdeen, Dundee and Glasgow. Not to be left out, England made number two with Coventry, and filled out the rest of the top ten.
However, much of the north of England is the polar opposite of Scotland, with yields as low as 1.47 per cent (Middlesbrough) and 1.87 per cent (Lancaster). Students here are clearly not willing to pay a premium – although Bolton bucks the trend with 4.58 per cent.
The keys to the animal house?
Good margins or not, it takes a certain level of courage to rent out a property to students. But it doesn’t have to be like being a zookeeper, if you approach it in the right way. Here are some tips for first-timers.
- Get accredited
This enables you to demonstrate that your property meets legal standards and that you abide by good management practices.
- Choose your property well
You have to picture yourself living there as a student. Is it easy to get to the university? (Your tenants may well not drive). If they do drive, is there parking? Be sure to have a communal area – don’t be tempted to turn the lounge into an extra bedroom. And don’t ask more than four housemates to share one bathroom.
- Furnish it properly but economically
Remember your tenants will be studying, so each bedroom will probably need a desk and other suitable furniture. It’s a good idea to start out with sparse furnishings and then ask your tenants what else they would like – within reason! Don’t be tempted by cheap junk; if the place starts to look like a dump, the tenants will start treating it like one.
- Let the students pick their own housemates
Some landlords make the mistake of choosing each housemate in isolation and then expecting them all to live harmoniously. It’s better to vet one person for suitability and then let him or her be the judge of who would make good housemates (you can still double-check them). It’s no guarantee of course, but it’s much more reliable than a random mix of personalities.
- Consider the neighbours
There’s no getting away from it – students can be noisy, sometime very noisy. They can also be lax about things like rubbish collections. If you don’t want to be constantly pestered by irate neighbours, set out some broad house rules and enforce them. Neighbours can be much more tolerant if they know loud music must stop by 11pm, for instance, or that they can’t have big social gatherings on weeknights. Use your discretion and be fair but tough.
Looking for a buy-to-let mortgage? Our Mortgage Survival Kit will help.