RICS top ten tips for student buy-to-lets 29th August 2012

The growing cost of renting across the UK is putting added pressure on already cash strapped students. As a solution, many parents are choosing to buy a property in their son or daughter’s university town to help alleviate the financial burden on their children. This can prove a good investment, however, RICS is warning parents to be wary of the potential pitfalls that can come with student buy-to-lets. 

For the uninitiated, here are Peter Bolton-King's (Global Residential Director at RICS) top ten tips for buying a student let.

• Research the location. The most important thing to remember in any property purchase is location, location, location. Buying in a university town means you are unlikely to know the area. Therefore research into the location and market is essential. Students will want to be close to the university campus with quick access into the town, with certain streets being popular with students. For knowledge on the area and market always consult a local agent for advice.

• Know what you are buying. Once you have identified a potential property look into what you are undertaking. Many old properties could need a lot more than redecorating or a new bathroom to bring them into a rentable condition. Typical building or structural faults such as dry rot, rising damp and fractured support beams can be extremely costly to repair. You cannot always rely on a valuation to pick these issues up and we would therefore recommend getting a property survey done before purchasing the property. These surveys can help identify any potential problems for a cost of around £200 - £700, potentially saving thousands in repairs and lost rent.

• Buy a student property. It is also important to invest in the right type of property for your target market. Remember you are not buying a home for yourself, or even your child who is likely to only use it as a temporary home for two or three years. Consider if the property has adequate bedroom and communal space for students to live and study. Students are unlikely to keep up on maintenance so steer away from anything with a large garden and expensive fittings. Although even the student renter has become more demanding over the last decade.

• Furnish accordingly. Most students will expect the property to be furnished so remember to set some money aside for furniture as well as decorating. However, all tenants, and particularly students, are unlikely to keep your property immaculate so do not spend fortunes. Pick carpets that are unlikely to show stains, light colours for walls and sturdy but economical furniture.

• Plan for the future. If you plan to let the property to students after you child has left, obtain two or three rental valuations from a regulated lettings agents. Alternatively, if you hope to sell the property take advice from an RICS member to find out if prices are moving up or down in the area and what types of properties are selling quickly.

• Avoid the void. Many students go home during the summer holidays meaning many student tenancy agreements only last nine or ten months. If you are taking out a loan to pay for your student buy-to-let consider how you will make any monthly repayments during these void periods such as looking for short-term lets to temporary workers or holiday lets. There is also the potential that your property will fail to let to students so it is important to have additional funding and a back-up lettings plan to cope with this scenario.

• Self-manage vs agent. By opting to self-manage you can save a considerable amount of the rental income. However, consider if it will it be realistic for you to keep an eye on a property and return to carry out repairs. By using a management agency you can alleviate this burden and help to source suitable tenants in the long-term.

• Rules and regulations. If you do decide to self-manage you will need to keep yourself compliant. This is for your benefit as well as the tenant’s. If something does go wrong, such as a tenant withholding rent, you will need to have the right Assured Shorthold Tenancy to protect yourself. This can be particularly true with a student let property where other parents may expect high standards or if a student drops out of a course and disappears in the middle of a tenancy period.

• Check local licensing laws. In addition to national laws, those landlords self-managing a property should be aware of local rules. Some local authorities, the Welsh Assembly Government and the Greater London Authority have or are looking to introduce some form of licensing or regulation of landlords so additional licensing costs or rules may apply at a local level. Many local authorities also have specific rules regarding houses in multiple occupation, which can significantly add to the cost of owning a student buy-to-let.

• Use a regulated agent. If using an agent to manage your property, RICS would advise landlords use agents who are members of a professional body. Unlike non-regulated agents, members of professional bodies are required to make their charges clear to landlords and tenants, protect client money and belong to an approved redress scheme. RICS is calling for single regulatory framework for the lettings market, which would ensure all agents adhere to these standards, but in the meantime stay safe by using a regulated agent.