Thinking of investing in a student let? Here’s everything you need to know about buy-to-let mortgages for student lets.
The UK is renowned for its universities, with one in almost every city. That means there is a constant stream of students looking for places to live. This high demand can make student buy-to-let investments look rather appealing. However, there are several important factors to consider before diving into a student buy-to-let mortgage.
What is a buy-to-let mortgage for student lets?
A buy-to-let mortgage is a mortgage used on a property that will be rented out to tenants, and a buy-to-let mortgage for student accommodation simply means the property will be rented out to students specifically.
It’s an attractive option for investors due to the steady stream of income available from student renters, but some lenders have strict rules when it comes to lending for this type of property.
Do you need a special mortgage to let a property to students?
Most buy-to-let lenders will accept student lets, but you must inform both your mortgage broker and lender that you intend to let your property out to students. Not all mortgage lenders accept this type of tenant, so you want to be sure yours does before you proceed.
If you rent to students without informing your lender, this
could be in breach of your mortgage terms and conditions. Better to be safe
than sorry!
Do you need a licence to let to students?
Many student lets are classed as HMO[AW1] Ls, so the local council your property is located in might ask you to get an HMO licence. If this is the case for you, you’ll need to provide your lender with proof of the licence or proof that you have applied for it before they proceed with your application.
Pros and cons of student buy-to-lets
There’s plenty of potential in investing in student buy-to-let properties, but there are some drawbacks, too. Make sure you have a full understanding of everything there is to consider:
Pros
- Higher rental yields compared to standard residential lets.
- The opportunity to diversify your investment portfolio.
- High demand means you won’t have too much trouble looking for tenants.
- Some properties even come with management teams to take some of the day-to-day tasks off your plate.
Cons
- Students tend to move on from properties more often than other tenants, which can mean more maintenance and admin for you.
- Some lenders have strict requirements for student lets.
- Student properties often have more wear and tear and need more frequent repairs and refurbishments.
- HMO regulations can be complex.
A mortgage advisor can help you weigh up the pros and cons of a student buy-to-let to help you decide if it’s a good investment option for you.
Am I eligible for a student buy-to-let mortgage?
Lender’s requirements for student buy-to-let mortgages are generally similar to standard buy-to-let mortgages, but there are a few differences you should be aware of:
· Experience: Some lenders prefer applicants to already have landlord experience because of the complexities of managing student lets.
· Deposit: You might be asked for a deposit of over 25%, especially for an HMO or a property in an area with a lot of student properties in it.
· Rental yield: Some lenders ask for a higher rental yield for student properties, often between 125% and 180% of the mortgage repayments.
· Property type: Not every lender will accept all types of student properties, some are not fans of larger HMOs.
· Obligations: Student lets can come with extra responsibilities, like HMO licences and meeting safety standards.
Prepare to be asked for any of the above so you aren’t met with any nasty surprises!
When is the best time to invest in student lets?
To time your student buy-to-let investment right, you want to have your property ready to market in time for the start of the academic year. The academic year runs from September to July, and students typically search for next year’s accommodation in their first term. Research from Save the Student shows that October and November are peak months.
Having your property ready for that timeline will put you in the best position to get as much interest as possible. There might be a lot of students looking for places to live, but there are often a lot of properties looking for student tenants, too. So you’ll want to give yourself the best chance of filling your property for the year.
Investing in a student buy-to-let property can be a great option for property investors and landlords. If you’re ready to make the move and are looking for a buy-to-let mortgage for student flats, speak to a member of our team. At The Mortgage Hut, we’re experts in buy-to-let mortgages and can answer any questions you might have about the process.
FAQs
Where should I invest in a student let?
Location plays a huge role in the success of a student let investment. We’re not short of good universities in the UK, but looking for a city with a top university is a good place to start. Remember that most students are looking for accommodation that’s as close to campus as possible, and rents in these areas tend to be higher.
Can I buy a student property for my child?
Yes, you can. Buying a student property for your child is a good way to invest your money and ensure they have a place to live throughout their studies. Just be aware of the additional tax paid on second homes, and any rules the lender might have for student buy-to-let mortgages.
Are student lets a good investment?
Student lets are generally considered a good investment considering that the number of students attending universities across the country continues to grow. This means long-term investment opportunities for landlords, promising rental prices, and rare void periods.
