Buy-to-let landlords targeting strong rental yields in the UK can expect to find the best returns if they buy close to a university.
Properties close to top-rated schools and high-brow supermarkets are known to often command higher price tags when compared with the surrounding area. However, a new study has found a link not for high house prices, but for healthy returns for landlords close the country’s universities.
Rental yields for properties in close proximity to a university are an average 1.3% higher than what can be achieved in the nearby area, according to data released by Stripe Property Group. This could boost a buy-to-let landlord’s annual returns by almost £6,000.
The report showed that landlords operating very close to universities achieved yields of an average 5.2%, compared with a 3.9% average when letting out properties further away from higher education institutions. This makes investing in property close to a university a “safe bet” for landlords.
Where are the best rental yields?
Stripe broke down its findings on a region-by-region basis. Interestingly, London was the only location where renting out property close to a university did not generate better rental yields.
Landlords who own rental homes in the north east of the country fare best when it comes to proximity to a university, with average rental yields of 6.5% – compared with 4.5% elsewhere. The average property close to a university costs £185,000 (while the cost is £157,924 on average for the surrounding area).
Next, Yorkshire and the Humber university-adjacent properties net rental yields of an average 6.2%, with homes costing £33,973 less than those in the surrounding area. The regional average is 4.6%.
In the East Midlands, where a rental home near a university will bag the landlord average rental yields of 5.5%, or 3.9% further away. This is based on homes being £30,411 cheaper close to universities, says the study.
The report lists the difference between properties close to universities and those further out as follows: east of England (0.9%), West Midlands (0.9%), south west (0.7%), north west (0.5%), and south east (0.4%).
Not renting to students?
Of course, a huge number of buy-to-let landlords in the industry at the moment opt to not let out their properties to students. Student lets tend to have high tenant turnovers and can often cost more to maintain.
But the study is still something to bear in mind for landlords who want to let their properties out to professionals and benefit from strong rental yields. Areas close to universities tend to also benefit from good public transport links, amenities, local facilities, and green space, all of which will attract most tenant types.
Many landlords also like to target recent graduates, many of which will rent for a number of years before getting onto the property ladder.
Commenting on the findings, James Forrester, managing director of Stripe Property Group, said: “Investing in buy-to-let properties near universities is one of the safest bets available on the property market.
“A consistent stream of tenants in need of quality accommodation means that void periods can be reduced considerably, provided that, as a landlord, you cultivate a good reputation among your tenants.
“And it’s worth remembering that there are many different types of students populating modern universities. You’ve got the classic school leavers, of course, but you’ve also got a potential audience of overseas students and mature students.
“When considering how to present and market your properties, it’s worth bearing in mind what makes each of these groups tick. If you get it right, university locations provide brilliant, reliable returns every single year.”