Is it time to consider investing in student buy-to-let property?

Over recent times, politicians of all persuasions have been increasingly vocal about their sympathy for the plight of renters. So far, their attempts to improve conditions for renters seem to have consisted largely of making life more and more difficult for private landlords.

While it remains to be seen what impact this will have in the long term, in the short term, it is certainly a good reason for landlords to look at their options and decide whether or not traditional buy-to-let property investment is still the right approach for them and, if not, what they should do about it.

The current reality of buy-to-let

Ultimately, market dynamics are a function of supply and demand and, quite simply, the UK property market has long had a chronic undersupply of property both to rent and to buy. This means that, in all probability, any actions which increase the expense of being a landlord will, in the long term, ultimately increase the expense of renting and anything which reduces the number of properties available to rent is almost guaranteed to have a negative impact on renters.

Therefore, those who are able and willing to ride out the politically-charged waves of the UK buy-to-let market stand a very good chance of continuing to see positive returns long into the foreseeable future. It is, however, perfectly understandable that some buy-to-let property investors will come to the conclusion that at this point in time, successful buy-to-let investment requires more work than they think is reasonable for the returns currently available and will look for alternatives.

The key to investing in property – diversification

When people think of student property, they may well think of the student bedsits of their youth and many TV programmes. These days, such bedsits would almost certainly be classed as houses for multiple occupation and they would be subject to the usual regulations of buy-to-let, plus some extra on top, such as the requirement for a special license. Having said that, they may, even so, still be excellent investment prospects.

There is, however, an alternative to this approach, which is to look at purpose-built student accommodation, the modern reinvention of the old-fashioned halls of residence. These developments are classed as commercial property and therefore work to a very different set of rules, but offer much of the same appeal as traditional buy-to-let.

From the perspective of students, these properties can offer many advantages over private HMOs, not least of which being that there is usually some degree of flexibility over the length of the tenancy, meaning that students can often choose to vacate the property over the long, summer break and not pay any rent on it, or to extend their tenancy to cover the whole year. If the students choose to vacate the room, then the room may be let out over the summer for example to visiting business people and/or to tourists. This means that demand for places in modern student properties is generally high and expected to remain so.

Mark Burns is the managing director of property investment firm Hopwood House.

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