Students at Birmingham University where the average house price is £116,732
Two separate studies published this week have found that landlords earn the best returns in Sunderland, though their assessments of the returns vary. Property Partner research claims landlords can earn yields of 6.9 per cent in the city; LendInvest data is slightly more conservative at 6.5 per cent.
Sunderland is also the cheapest place to invest among the top 20 student towns, with the average property price standing at just £90,000.
In second spot is Manchester. The city is home to three ranked universities and a student population of nearly 90,000. Average property prices in Manchester stand at £135,000 with LendInvest analysis suggesting returns can be as much as 6.2 per cent.
Birmingham ranks at number three. Clustered just to the east of the city centre, the campuses of Aston and Birmingham City University offer a good combination of low investment cost and strong tenant demand. The average sold house price there is just £116,732, meaning purchase costs are relatively low, while Property Partner puts the average net yield at 4.5 per cent a year.
John Goodall, chief executive of buy-to-let lender Landbay, said: ‘In some cities there will always be strong demand for rental accommodation from students, but landlords looking to make a quick buck must consider the local market carefully.
TOP TIPS FOR LETTING TO STUDENTS
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Aim for a property which has at least three bedrooms. Students tend to rent in groups of three to five people. Having more than one bathroom will also be a big selling point
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Location-wise, look for properties with good access to the university campus as well as basic shops and services
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It’s a good idea to ask for a guarantor for each student tenant. That way, even if the student doesn’t pay the rent, you can recover it from the guarantor
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Consider using a joint tenancy agreement, rather than an individual agreement with each tenant. This way, if one tenant drops out or leaves, you will not miss out on rent while the room is unoccupied
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Some universities, like the University of Southampton, compile directories of accredited private student accommodation in the area. You will need to comply with certain standards in order to get onto these directories, but they are a great way of directly reaching suitable tenants
Source: LendInvest
'Particularly following the UK’s vote for Brexit, there are question marks over the future of the Erasmus scheme for example – if fewer international students come to the UK in the future, that could have a material impact on the number of students at certain universities. Some universities will likely be more affected than others so it pays to understand the area and other forms of tenant demand before jumping in.’
Christian Faes, of lender LendInvest, said investing through a peer-to-peer lender could offer a compromise.
'While interest rates remain at all-time lows, it'll be up to individuals to make their money work harder for them,' he said. 'Relying on banks to offer great rates of return won't get them anywhere. It's reasonable therefore to expect that more and more people will start to branch out from the traditional savings options to proven alternatives, like investments, to find better returns on their money.
'Property has always been a fundamentally strong asset class and, as our results show, seriously competitive yields can be found in property investments all over the country.'
There is a degree of risk in this type of investing, just as there is with buy-to-let.
Where you invest is key: becoming a landlord is less profitable in London and the South East of England. Years of double-digit price rises have squeezed yields on buy-to-let property.
Six of the bottom ten ranking universities for rental income are in the capital, with Imperial College, in Kensington and Chelsea, shown to be the lowest-yielding property area surveyed offering returns of just 1.3 per cent.
Dan Gandesha, chief executive of property crowdfunding platform Property Partner, said: “In this era of ultra low rates and high market volatility, stable investments which provide a reliable income, and medium to long-term capital growth prospects are the holy grail.
“Property is a total returns investment, and until recently, it’s been a capital returns play. But with Brexit, the rules of the game are changing. Now our investors are increasingly focused on the reliable income they can earn, month after month.'
| University town | Median Rent pcm | Gross annual rent | Average house price | Average gross annual yield % | Average net annual yield % |
|---|---|---|---|---|---|
| Sunderland | £575 | £6,900 | £65,201 | 10.6 | 6.9 |
| Teesside (Middlesbrough) | £425 | £5,100 | £56,272 | 9.1 | 5.9 |
| Aston + Birmingham City | £676 | £8,112 | £116,732 | 6.9 | 4.5 |
| Salford | £750 | £9,000 | £131,863 | 6.8 | 4.4 |
| Edinburgh | £1,101 | £13,212 | £197,010 | 6.7 | 4.4 |
| Manchester Metropolitan | £895 | £10,740 | £160,315 | 6.7 | 4.4 |
| Manchester | £750 | £9,000 | £135,174 | 6.7 | 4.3 |
| Newcastle + Northumbria | £823 | £9,876 | £150,609 | 6.6 | 4.3 |
| Nottingham + Nottingham Trent | £794 | £9,528 | £151,535 | 6.3 | 4.1 |
| Coventry | £901 | £10,812 | £179,412 | 6 | 3.9 |
| Bangor | £750 | £9,000 | £156,173 | 5.8 | 3.7 |
| Huddersfield | £540 | £6,480 | £116,802 | 5.5 | 3.6 |
| Portsmouth | £925 | £11,100 | £201,434 | 5.5 | 3.6 |
| Queen's, Belfast | £802 | £9,624 | £183,505 | 5.2 | 3.4 |
| Edge Hill (Ormskirk) | £1,040 | £12,480 | £239,298 | 5.2 | 3.4 |
| Durham | £650 | £7,800 | £151,438 | 5.2 | 3.3 |
| Southampton | £901 | £10,812 | £212,852 | 5.1 | 3.3 |
| Cumbria (Carlisle) | £477 | £5,724 | £113,025 | 5.1 | 3.3 |
| Leeds | £776 | £9,312 | £184,628 | 5 |
3.3
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