Student landlord - buy-to-let bargains

Following on from our student landlord special last week I came across this research on returns by the Property Show showing rental yields in some of the top University Towns.

Landlord Insurance - why get one quote when you can compare the market?


A DROP in property prices has brought great bargains in university areas but brokers warn that a 25% deposit has become mandatory unless landlords can secure sky-high rents.

Students lets strong
Student lets were one of the strongest performing areas in residential property last year and could bring returns of more than 10% this year if you pick the towns that produce the best rental yield.

Research by The Property Show reveals that average rental yield for the top 10
university towns is now 7.9% – outstripping the UK average of 6.4% for a three-bedroom terraced house. The worst student areas, however, yield less than 4%.

Nick Clark of The Property Show said: “With house prices falling . . . investors should look at student accommodation as a long-term investment based on high rental returns rather than capital growth. If they are planning to sell within a year or two they will lose out.”

While securing a mortgage has become difficult, there is money to be made. The trick is choosing the right city.

Cambridge and York are among the most popular search-es on propertyfinder.com, the online estate agent, but Nottingham has the best yield at 10.19%, The Property Show said.

The average price of a three-bedroom terraced house in Nottingham has dropped to £100,736 from £101,936 while the annual rent stands at £10,263, the figures show.

Durham and Manchester are next best, yielding 9.23% and 8.17% on an average house price of £120,000 and £114,602 respectively. At the other end, Crewe returns only 3.92% with house prices more level at £175,703. Buying property in Nottingham at £100,736, with the help of a tracker mortgage from Birmingham Mid-shires at a rate of 6.09% for two years and a fee of 2%, would require a deposit of £25,184.

Monthly repayments on an interest-only basis would then work out at £383, or £394 if the fee were added to the loan.

The lender requires rental cover of 125%. However, with landlords able to command rents of £10,263 a year, or £789 a month, the rent would easily meet the mortgage criteria, and make a significant profit.

Nottingham shows good potential returns
Property falls have been proportionately greater in Nottingham, which has succumbed to an oversupply of new-builds.

However, Laura Woodward of Haart, the estate agent, said: “Now that property prices have fallen by 15% this year across Nottingham, you are almost guaranteed to achieve a rental yield above 8% in prime areas.”

Tax breaks
Property Hawk urges parents to make the most of tax breaks to maximise returns if their offspring attends university. They could consider buying a student flat on the basis of owning 99% of the property, with their student child having the remaining 1%.

They can then enter a formal profit-sharing agreement with the child so the profits go to the student, taxed at a low or For example, a higher-rate taxpayer with a £200,000 student property on a net yield of say 5%, providing an income of £10,000 a year, would save up to £3,087 on that income.

Liverpool Investor
Gavin Davies, 33, a property developer in Liverpool, owns 15 buy-to-let properties, renting mostly to students. His latest acquisition was a five-bedroom terraced house bought for £142,000 last April.

“I know I got a bargain – the previous sales on the street were more in the region of £165,000,” he said. “Returns are good but I’m only seeing it in the student market at the moment.”

He bought another property last August. “If I was to rent to a family I’d get £1,200 a month but I can rent it to six individuals for £1,800 while my mortgage is £1,100,” he added.