Finding the Right Property
As well as being a buy-to-let multi-millionaire, Ajay Ahuja is a chartered accountant. He is founder and owner of Accountants Direct which provides references for the self-employed for mortgaging purposes. He advises various local councils and accommodation projects and works to provide innovative solutions to problems facing the homeless. He also consults with corporations and private clients to help build property portfolios for maximum gain.
What to look for when viewing a property
Do not believe the myth that a property is only worth buying if you could see yourself living there. The fact is you aren’t going to live there. What you should ask is whether students would live here.
Matching the right property with your target group is of crucial importance. The image of three or four undernourished and impoverished students, willing to live in a shoebox for three years, is a stereotype that has disappeared with the last decade.
This does not mean that every student would like a penthouse suite with a Jacuzzi; nor does it mean that the trusted old formula of a three-bedroomed house with a standard sofa, kitchen table, etc. would not be adequate.
What is important is asking yourself how a potential student buy-to-let purchase can be made as competitive as possible within its local setting. For example, if you know that the latest student developments offered by the university will have full access to hi-speed or broadband internet in every room, then you must provide at least the same.
The best way to find out the demand and suitability of property is to speak to both the university students’ union and the university student housing office. I have found that this way, from one perspective you’ll get ideas through the student representation and from the other, a more commercially focused response and suggestions.
When viewing a property check for:
Carpets |
You have a legal duty to provide floor coverings. If there are no carpets then you will have to pay for new ones. |
Kitchen |
Is the kitchen big enough to accommodate a small dining table? This is attractive if there is only one reception room and it turns the kitchen into a kitchen diner. |
Smallest bedroom |
If the smallest bedroom is smaller than 6ft 6ins in any direction then it is not a bedroom! You need to be able to get a bed in a bedroom hence this room can only be considered as a study or a baby’s room. You need to consider this when thinking about what type of tenant you are looking for – if you are looking for two professional people to share a two bedroomed flat then the second bedroom must be bigger than 6ft 6ins. |
Bathroom |
Is there a fitted shower? A bathroom is a lot more desirable if there is a power shower. If there are two bathrooms then the property is very desirable, even if it is only a shower room. |
Heating |
Is the heating system old? This can be costly to replace. If possible get it checked prior to purchase. It is your legal duty to provide heating and to issue a gas safety record. |
Electrics |
Are the electric sockets old? This will tell you that at some point the whole electric system will require rewiring. |
Service charges |
If it is a flat you will have to pay service charges. Ask the agent if they have any details of the service charges. Some places have exorbitant service charges that render the whole investment unprofitable. Avoid listed buildings as they have frequent redecoration policies that can be expensive. |
If the property is in a reasonable condition then buy it. If demand is good there should be no problem letting it out as long as the property is in reasonable condition.
Furnished or not?
The normal procedure for students is to start searching for next year’s room within a few months of starting their course. In the majority of cases, they devote a significant amount of time to finding that right house. In addition to factors such as location, price, etc., a key factor in attracting the right student for your property is how you furnish your house.
The answer to the furnished or not query is, almost definitely, a big yes! A more appropriate question would be what are the necessary furnishings required to attract the right student? You must remember that for students, this will probably be their first time searching for a house or room to rent and they will take a tacit interest in the furnishings and fittings upon viewing a house. The key is not to overload the house with junk-shop furnishings and rusty, worn out cookers or freezers. The higher the quality of the property and its fittings, the better chance you have of finding responsible students to look after your property.
These are some key questions that I have asked myself:
- Is the cooker safe and does it need replacing?
- What kind of settee can I get that will be reasonably priced but welcoming?
- What items does the student tenant expect to find in the house?
- Should I provide a television?
As there is a requirement to furnish student houses, similar questions should be an integral part of the way you approach the student market. Some key furnishings related to student accommodation include the following.
Kitchen appliances |
In general, a fridge-freezer and cooker are always basic requirements. Often microwaves, washing machines, tumble dryers and to a lesser extent dishwashers are also provided. Again, you must remember that the product needs to attract the desired student tenant. For example, if you decide to purchase a washing machine, make sure that it is a durable, long-lasting machine intended for heavy usage. It’s no good buying one that, despite being very cheap, could cause annoyances and headaches five months down the line. Microwaves tend to be a good buy as they add to the aesthetic appeal of the kitchen and can cost as little as £30 for a decent one. Another important yet often neglected aspect is the availability of workspace. You could have a kitchen with a new hob or dishwasher, yet no space to butter a slice of bread. This could get frustrating for the tenant and may mean they use your sparkling white new dishwasher or microwave as a cutting board for their Sunday roast! |
Sofas/couches |
With student properties, it could be that the front room reception gets converted into an extra bedroom, meaning that the second reception becomes a living-cum-dining room. A good sofa, one that looks appealing to the eye and is fairly comfortable, will suffice. An overly expensive leather sofa is not a necessity. |
Bedding |
If it is a small bedroom, then obviously you’ll only have space to accommodate a single mattress. But if it is quite a large bedroom, try to get a double bed if your budget allows. A double bed will always look more appealing than a single bed, regardless of the tenant being a student or not, and the cost difference between the two isn’t too much. |
Television, Sky, digital |
This is where it gets a bit tricky. Is it worth it and can 1 afford the expenditure? 1 recall that in my student days (which were ages ago!), a few of my friends had landlords that provided the set-up for the Sky or cable network and my friends just paid for the monthly billing. I’m a bit wary of installing Sky in student properties, but 1 know others who have done so and there hasn’t been much of a problem for them to date. You should also consider that you might not always have a student tenant from July to September, so you may have to bear the brunt of the costs. TV sets are really cheap these days. If you feel that the prospective tenants you are looking for will look after the set, this will add to the attractiveness of your home. |
Internet |
This will undeniably make your house appealing to all students as computer and internet usage has become a mandatory part of university studying. Should you be able to incorporate a way of accessing the internet from every bedroom in the house, the marketing appeal of this will be a huge pulling factor. |
Location
As the market swells with buy-to-let investors, you must choose the best area within your budget to ensure that the potential profitability of the location is worth your money, time and dedication. For example, in my humble opinion – and I am sure others would agree – there are very few spots in London that would generate enough yield to compensate for the huge initial investment for a student buy-to-let.
Just glancing at the yields calculated in the listings, the not-so profitable areas include Bristol, Cambridge, Liverpool and Oxford due to the low yields. As I said earlier, I see capital appreciation as a bonus. If it makes money now it will almost certainly make you money in the future. In areas like Liverpool, as buoyant as the student market is, the whole city is plagued with buy-to-lets. Rent prices cannot keep up with increased house prices and standstill or general reduction of rents is due to this saturation, producing relatively low yields. Despite this, if you can still pick up a bargain in a potential or existing student area, then go for it. If it means that with your purchase you can offer competitive rental rates and still make a profit, then it’s worth a look.
By contrast, the University of Brighton and the University of Bournemouth have a lack of student housing available and the universities encourage landlords to register with them in order to let out to students. The general high house prices will deter those that cannot afford the huge initial outlay, but there are still some good returns on the right property, if it is within your reach.
When considering the location of the property, it may work to your disadvantage to go for something straightaway based on how cheap the properties are in a certain area. If that area is not in demand by the students, then it’s not really worth the effort. Studies2 have shown that 20% of the 700,000 student lettings offered by the traditional landlord sector in the UK are unfit for letting. You don’t want to add your house to that by buying a block of houses in a run-down area or an area that is renowned not to be student friendly.
From my experience, the best areas are immediately next to or near the campus or university lecture halls, followed by houses on or near bus routes leading to the university and town centre. These houses tend to have better capital appreciation, followed by those that are maybe two to three miles away from campus.
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