Successful A-level results mean thousands more students heading off to university and a constant demand for accommodation. If you are thinking of buying to let in a university town or want to invest in property for your own children to live in, here are some basic lessons for landlords.
As you would expect, properties close to universities have increased in value in recent years. But in some cases, they have grown considerably more than the national average. Halifax Estate Agents has examined the changes in average property prices for the country's top 20 university towns and cities as well as those offering the most popular courses. The average increase in property prices across the UK over the past five years has been 103%, and the majority of these towns and cities have performed very well, with ten out of the 13 university towns outside London outperforming or matching the UK over the same period. Two exceptions, Cambridge and Oxford, nonetheless have still seen a doubling in prices since 1999.
Do your homework
Aim to buy in a popular area, within walking or cycling distance of the university itself and/or with good transport links. But don't be tempted by anything too chic which would be unaffordable for students with limited budgets and looming debts. Quiet residential areas may also be unsuitable if your tenants are likely to keep unsociable hours and create noise. Talk to local letting agents about the best locations and ask for data on occupancy rates. Estate agents should be able to provide information on property price increases in the areas you are considering. If you are taking out a buy-to-let mortgage, make sure the lender agrees to student tenants as some do not.
Timing is also crucial. If you are aiming to let your property by the start of a new academic year then talk to the university to find out when they advertise or circulate rental information to students. This is often done in January or February although there is usually still demand in the following months.
One of the key advantages of renting to students is that are likely to sign a tenancy agreement for the whole year, particularly if they plan to work locally during the summer break. If the first year goes well and everyone is happy you could find your property is let constantly to the same group of tenants for several years running. But renting to students rather than young professionals brings its own issues. Some letting agents will only consider taking on properties rented to second year students and beyond because of the high drop-out rate during the first year - something worth remembering if you plan to manage the property yourself. You should also aim to be relatively relaxed about standards of cleanliness, although you may want to build a cleaning fee into the deposit in advance. Don't expect any garden area to be maintained either.
University challenge
A growing number of parents are considering buying a property for their children to live in while at university. As well as providing peace of mind about the location and standard of living accommodation, this allows parents to subsidise their child's rent and provides an investment opportunity. It makes sense to purchase a house with several bedrooms so that rent from other tenants covers the cost of the mortgage. Be prepared to hold onto the property after your child graduates if it is not a good time to sell.
Those parents who have large levels of equity in their own first homes, could consider remortgaging the family house to free up money for a cash purchase on the second property. This could also help secure more favourable rates than those available from buy-to-let lenders. Parents also have the option of putting the property in their child's name and acting as guarantor for the mortgage. This avoids capital gains tax if the property is subsequently sold at a substantial profit. Of course, you will need to trust you child to pass on the gain to you.
Finally, it's worth remembering that student houses are notorious targets for thieves who know they can usual get away with multiple stereos, DVD players, laptops and other items. As a landlord, you can ensure that the property has secure locks on doors and windows and as a parent, you can further support your child by taking out a contents insurance policy.
Compare 1000s of mortgages here
Not sure which is the best mortgage for you? Try this service
Mortgage Best Buys
Yahoo! Finance Mortgage Centre
More articles by Sarah Modlock
