Which university towns offer the best buy-to-let returns?
This week, A-level pupils get their results and University places – and many new and existing students will be heading into private rented accommodation for the start of the new semester.
Students don’t have the best of reputations as tenants, however research from Simple Landlords Insurance suggests letting to learners could pay off. In a new league table published today, Simple Landlords Insurance rate universities by yield, with St Andrews hitting the top spot with the chance to earn up to a 12%p.a. return.
Lancaster comes in at second place, with Loughborough and Birmingham taking third and fourth spots. All have the potential to achieve a yield of more than 10%p.a. for a student accommodation landlord. Exeter, Durham, Sussex and Nottingham also perform strongly, with yields in excess of 9.5%p.a.
Alex Huntley, Head of Operations at Simple, explained: “We took the top universities in the country – according to the Complete University Guide and examined which offered the smartest investment opportunity. While the academic league tables are always led by Cambridge and Oxford, our study shows that neither of those locations offers the strongest yield for a buy-to-let investor.
“Unlike other studies, ours centred in on the house prices in the streets where students at each of the universities actually choose to live. It compared the cost of buying one of these properties with the rent that is actually paid by students studying at the establishments in question.”
St Andrews, where Prince William famously met his future wife Catherine Middleton, topped of the yield table, and is also third in the Complete University Guide, making it desirable for investors and students alike. The research looked at Largo Road, in St Andrews, where fairly large houses cost an average of £300,000 and five students paying £150 a week each could earn a collective £36,000 a year in rent for a landlord.
Meanwhile Oxford offered the lowest value of the universities covered by the study. Properties in popular student area Iffley Road change hands for about £720,000, and could net a yield of 3.33% (£2,000 a month). That makes the high initial outlay look steep, with much less lucrative returns.
The University of East Anglia in Norwich, and Cambridge, Bristol and Surrey universities all feature towards the bottom of the table.
“It goes to show that with some research, there are some great investment opportunities out there for people prepared to target the student market,” adds Alex.
“Rising educational costs means that more and more students are having to work to support themselves during university, meaning that, many are there to work rather than just party, and often don’t deserve their bad reputation. One way to mitigate the risk is to invest in an area you know for a student you know – and we’re seeing more people with children at university choosing to invest and buy a property rather than see rent going down the drain.”
“The real key in renting to students is to make sure you’ve got the right insurance. Look into accidental and malicious damage cover, for instance, and make sure you’re inspecting regularly so small issues don’t become bigger, more expensive problems.”