Looking for a good investment? London's students can be a great bet

Buy a property and let to students - it's a financial no-brainer. Faith Glasgow tells you where to look
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Maltings Close, Bow
£225,000: a two-bedroom flat with balcony, at Maltings Close, near Bow, with yield of around 5.5 per cent. Contact Felicity J Lord (fjlord.co.uk)
New research underlines the investment appeal of student housing. With a continuing lack of supply meeting increasing demand, this investment avenue is set “to sustain returns in the foreseeable future”, especially in London, where the shortfall is most pronounced, says Savills.

With 290,000 full-time students, as of 2010/11, and only 55,000 existing (university and private) bed spaces, just 19 per cent of the capital’s student population is catered for.

Even including a further 25,500 bed spaces in the pipeline and assuming 30 per cent of students will live at home, nearly half will struggle to find accommodation, the research shows.

Where to Buy

There are 30 major universities and colleges across London but the accommodation shortfalls are not evenly spread. Most of the central London colleges, including King’s College, University College, London School of Economics and Westminster University, are on the lookout for more beds — though not necessarily in central London.

At the University of London Housing Services (ULHS), senior housing adviser Roland Shanks says that students he deals with are typically prepared to travel up to 30 minutes to get to college, so popular postcodes include Camden (NW1), Islington (N1), Holloway (N7) and Archway (N19). “For students looking to save on rents, E1, E2 and E3 (including Shoreditch, Bethnal Green and Mile End) would also be good bets,” he adds.

Jacqui Daly, director of Savills residential research, points out that these boroughs (Tower Hamlets, Islington and Camden) have a cluster of universities and also good transport links into the central colleges. They are relatively well-off for purpose-built student accommodation, but student demand is such that private landlords could do well there, too — if they can find appropriate, suitably priced properties.

Shanks suggests that ex-council houses work well as they tend to be cheaper, which will boost rental yield (the annual rent as a percentage of the price). “Most of our students do not live in large house-shares any more — groups tend to be smaller and more centrally located, as we have so many overseas and postgraduate students.”

Arena, Hayes
From £330,000: a four-bedroom house at Arena, Hayes, 25 minutes by bus from Brunel University, with a 5.9 per cent estimated yield. Visit barratthomes.co.uk
However, some less-central universities also have pronounced local shortages. Middlesex University in north London is an interesting case: it has been consolidating its eight campuses and from September will have just one main site, in Hendon.

“There is definitely going to be a shortage of student housing in the area,” says Evelyn Azilah, Middlesex’s private rented accommodation manager. “But Hendon has become an expensive area, so landlords are looking further afield in nearby Colindale, Edgware and West Hampstead.”

Kasru Ali, manager of Bairstow Eves’s Colindale branch, suggests investors can find suitable three-bedroom houses (where one reception room is typically used as a fourth bedroom) for around £350,000 in the area. Students might pay around £115 a week each for a room there, according to the Middlesex accommodation website middlesexstudentpad.co.uk. That’s a gross yield of about 6.8 per cent.

Kingston University is another noteworthy example suffering particular accommodation shortfalls, with only 12 per cent of its students catered for. Moreover, Kingston is unusual among UK universities in operating a “headed tenancy” service, whereby landlords rent to the university itself (at a rent broadly in line with the local market), rather than to individual students.

Landlords pay a management fee of 3.5 per cent (plus VAT) of rental income, and in return the university guarantees an agreed rent for the term of the agreement, finds and vets the tenants, inspects the property each term and deals with any day to day maintenance problems.

“Headed tenancy contracts are 46-48 weeks in length, though it’s quite common for tenants to apply to remain in a property for an additional year,” says Kingston University’s accommodation manager Damien Cannell.

What sort of yield could you expect around Kingston? Estate agent Greenfield is selling ideal five-bedroom properties for around £450,000, and these would rent for around £115 per student per week, producing a gross yield of around 6.6 per cent.

Thinking big?

If you’re thinking of buying a larger property, be aware of the rules of Houses of Multiple Occupation, or HMOs. Under these, any property with three or more storeys and five or more tenants requires a licence from the local council before being let.

Contacts for landlords

Wherever in London you opt to buy, you need to register with university accommodation offices and post details of your property on their website, where house-hunting students can check it out.

LUHS, for instance, caters for 100,000 students and has around 800-1000 landlords registered on its books. More details at housing.lon.ac.uk.

The nationwide student accommodation website Studentpad is used by Greenwich, Roehampton, Imperial College and City University as well as Middlesex; landlords can post details of available properties through the sister website studentlandlord.net.

For more details on Kingston’s headed tenancy management service, go to kingston.ac.uk/accommodation/landlords/headed-tenancy.

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