Landlords considering the buy-to-let market may find student accommodations offer more lucrative returns than traditional rentals, with some locations yielding over 9 percent. Data from mortgage lender Paragon Bank indicates that properties in student-centric postcodes achieve an average yield of 7.32%, compared to 6.86% in non-student areas.
The calculation of yield represents the annual rental income an investor can expect relative to the property's purchase price. For instance, a 5 percent yield on a £200,000 property translates to £10,000 in annual rental income.
Stoke-on-Trent emerged as the top-performing location, offering landlords a 9.42 percent yield. This is based on an average annual rental income of £14,222 and a typical property valuation of £150,982 for properties serving the University of Staffordshire and Keele University. Plymouth followed with a yield of 9.27 percent, generating average annual rental income of £35,224 against an average property valuation of £379,881.
Cities with Russell Group universities also feature prominently among the top 15 highest-yielding locations. Liverpool offers landlords an expected yield of 8.86 percent, with annual rental income averaging £26,399 on properties valued at £297,951. Cardiff and Edinburgh student lets follow, producing average returns of 8.27 percent and 8.23 percent, respectively. York and Leeds also recorded yields above 8 percent.
Despite the attractive yields, property experts emphasize that investing in student housing is not a decision to be taken lightly. "Student property is a specialist market," stated Louisa Sedgwick, managing director of Mortgages at Paragon Bank. Landlords must understand local demand, student accommodation requirements, and the responsibilities of managing shared housing.
Chris Sykes, a mortgage adviser at MSP Financial Solutions, noted that student lets often endure more wear and tear than professionally managed multi-occupancy homes. "Students will have parties, they may cause noise complaints with neighbours, smoke residue inside a property is a frequent one too – so I’d imagine the insurance side of things is more expensive also," Sykes said. He also pointed to potential landlord concerns regarding the Renters Rights Act. Under the new legislation, most properties are now on periodic tenancies, meaning landlords cannot enforce fixed terms. This allows renters, including students whose academic terms are typically shorter than a full year, to end tenancies with two months' notice, potentially leaving properties vacant during summer breaks.
While purpose-built student accommodation may be exempt from these changes, landlords of standard houses and flats converted for student use do not benefit from this exemption.
Michael Zucker, a chartered surveyor, added that student expectations for accommodation have significantly increased. Modern students anticipate high standards, including reliable Wi-Fi, adequate workspace in rooms, and well-equipped communal living and kitchen areas. Properties offering en-suite bathrooms can command higher rental values. Accessibility to educational institutions remains crucial, and including utility bills for heating and hot water in the rent can help mitigate disputes.
Mortgage lending for student properties can also be more complex. Some lenders avoid exclusively student-let properties due to perceived higher risks. Securing a mortgage for a student let is often comparable to an HMO mortgage, but requires selecting appropriate lenders and ensuring the property meets licensing requirements.