Locations that are home to well-renowned universities often prove to have good investment potential, and the latest list shows the top performing spots in the UK.
Preston has ranked third out of all the UK’s university cities when it comes to buy-to-let property investment in the student space, making it the most attractive place in the north west for those considering investing in student accommodation. Thanks to high tenant demand, Preston is also a top location for those renting to professionals.
The research, carried out by Molo, put Derby in top position. The city enjoys average gross yields of 5.34%, with 20,955 students living there, making up just less than 3% of the total population. It points out that only 1.67% of all properties cater for students, revealing a potential “gap in the market”.
Next on the list is Hatfield in Hertfordshire, home to around 31,940 students, yet with just 2.47% of properties being student lets. Yields are lower there, though, at 4.38% on average.
Preston actually enjoys the highest rental yields out of the top four locations, at 5.41%. With 28,325 students residing there, the fact that only 2.62% of all properties are for the student population again shows a potential gap for investors, with supply currently falling short of demand.
Preston and Manchester lead north west
Preston and Manchester are the only two cities in the top 10 of Molo’s list based in the north west of England, with the rest of the locations relatively widely spread out. This indicates there is less of a north-south divide when it comes to student populations.
Manchester offers some of the highest rental yields of all the locations, with an average gross yield for landlords of 6.4%, according to Molo. It also has the highest number of students in the top 10 list, with around 83,390 living in the city, while 3.85% of property there is student lets.
Both cities have become targets for property investors in recent years, thanks to extensive regeneration and external investment. Over the past decade in particular, Preston has risen through the ranks, offering property investors competitive returns compared to other areas.
Nottingham stood out as the city which already had the highest proportion of student accommodation overall, at 11.79%. However, the city is also home to the country’s third largest student population (78,725), so Molo points out that “landlords should still see plenty of tenant demand in the city”.
Other locations in Molo’s top 10 list were Reading, Durham, Swansea, Portsmouth, Bristol and Canterbury.
Student lets can offer stability
There are numerous pros and cons to investing in student accommodation. On the positive side, they tend to offer consistent, predictable demand, as universities tend to bring in similar numbers of students each year who will all need somewhere to live.
Tenancies are typically for 12 months, aligning with the academic year, which brings more certainty to this type of let. They can also offer stronger rental yields than traditional buy-to-lets, as they are in high demand and you have multiple people sharing each property.
However, the annual turnover can mean additional effort and costs for the landlord, as it is rare for students to stay in one property for more than one academic year. There is also an additional risk of wear and tear with student property compared to with longer-term, professional tenants.
How student landlords can succeed
Commenting on the latest findings, Mark Michaelides, vice president of strategy at Molo, says: “For many landlords, student housing tends to see pretty stable demand, as there is almost always a healthy appetite for rentals in university towns and cities.
“However, given how crowded the market can also be, it’s important that landlords are differentiating their offerings, to make sure they’re able to attract (and retain) good tenants year after year.
“Making properties stand out to students often hinges on small touches, such as offering fast, reliable internet and perhaps including bills in the rent. Things like bike storage or parking space may also be attractive.
“Landlords looking to thrive in competitive cities should consider what they can do around the property as well, whether it’s installing premium fixtures, smart home tech like digital door locks, or eco upgrades such as solar panels. Outdoor enhancements, such as barbeques and furniture, could also entice tenants.
“Ultimately, diversifying a student rental can help you command attention and maximise rental yields, even with properties in popular but crowded markets.”
BuyAssociation has access to some exciting projects for property investors in Preston, as well as many other key locations in the north west. Take a look at our current Preston projects, and get in touch for more information.
