Right student tenants? No student tenants!

Drop-out rates

Before you think you’ve found that perfect house with potential for great returns, a factor that is amazingly overlooked by naive landlords is the drop-out rate for the university. If you have a university where a large number of the students don’t finish their course, then you may suffer the headache of being left with an empty property for half of the year. Despite the fact that student rental yields are quite stable and prices do not vary much across the UK, you might find it impossible to find a tenant. With council tax, service charges and maintenance bills, you would end up with a negative return on your investment.

Middlesborough, for example, has been in the headlines due to it being a property hotspot. Terraced housing in the centre of town has gained considerable value over the past few years, with buy-to-let investors capitalising on this for refurbishment and letting out to students. On the plus side, Middlesborough has seen accelerated house prices and there are a great number of students there who are potential tenants. However, the university is in the process of building new multi-million-pound halls of residence to accommodate the projected number of students. Taking this into consideration, and accounting for the fact that Teesside University suffers from a 12% drop-out rate1, the shiny prospect of student lets in Middlesborough loses some of its gloss.

Figures show that a considerable number of London universities experience a high drop-out rate, with the University of North London witnessing 29% of its students dropping out of their courses. In contrast, Imperial College has a low drop-out rate of 4%. In the North West, 23% did not finish their course at the Bolton Institute of Higher Education. In Wales, the University of Wales Lampeter has a high drop-out rate of 19%. In Scotland the University of Abertay Dundee also sees a 19% drop-out rate1.

Can’t find a tenant!

If things do turn sour and the area you have purchased in does see a significant increase of unforeseen drop-outs or other negative factors, then the following suggestions are some ways to tackle this.

Void periods

As we are probably all aware, tenants come in all shapes and sizes regardless of the ‘student’ tag. You should try to make your property as widely appealing as possible in order to avoid it being rejected because of the pink and green striped wallpaper you took a fancy to.

The best advice is to follow the usual guidelines:

• go for neutral decoration
• minimise junk
• invest in high demand student areas
• and fully promote your property by using all advertising means possible.

For information on covering the void period during the summer break, i.e. between the academic timetables, see Chapter 1.

Should I credit-check the student tenants?

Let’s assume everything’s going well and you find yourself inundated with potential student tenants wanting to rent your property (!).You will naturally ask yourself whether they can keep up with rent payments and you’re not going to end up tenantless halfway through the academic year.

You can check the credit of your tenant like a lender credit-checks a borrower. This costs between £l7.50-£94 depending on what service you require. But we’re going to have face some facts here. First, it is not very likely that university students will have much work history, so credit referencing them will be a waste of time and money.

Also, it is well documented that students are experiencing some tough times these days. With the ongoing debate on additional tuition fees, and uncertainty about the amount of money they or their parents will invest, there are not many viable ways to guarantee rent payment.

The best option is to get the student tenants to sign one tenancy agreement, whereby if one of the student tenants leaves, they will all be responsible for the full payment of the shortfall or for finding a new flatmate. You may also wish to ensure they provide a guarantor, someone who will be responsible for their deposit and potential dilapidations to your property.

The relationship between landlord and tenant

We’ve all heard of those horror stories where the student tenants have had an all night party, trashed the place and done some serious fire-damage to the property due to their inability to make toast. Then on the flipside, we’ve also been exposed to stories from student tenants on how a crazed landlord has refused to fix the front door despite several burglaries within a week!

These extreme cases should be taken with caution and the point is to not assume too much. Your tenant is not your friend, but nor is he or she out to make life hell for you! Well, here’s hoping not.

Remember that you are in business with each other and that is the only reason why you know each other. For the relationship to last, the following simple contract needs to hold:

• you are supplying a safe property for the tenant to live in and the tenant is paying you the rent on time.

University accredited lettings

You should consider using the university lettings system if you are finding it tough to channel your energies into finding tenants. They will have better access to the students and with full respect to other landlords, they will be trusted a lot more. However, it is often tough getting your property registered with the university lettings system, as there is much demand to be on it. They also have strict controls and measures on what type of property they want, so this will make it tougher.