Shun the spires, student property investors told

Shun the spires, student property investors told

Landlords who are considering investing in student residences should look beyond the picturesque spires of Oxford and head further north for the best and quickest returns on their investment.

Leicester has been found to be the best city in the UK for student property landlords, followed by Birmingham, Leeds, Manchester and Liverpool.

The worst places to invest in are Oxford, York, Cardiff, Edinburgh and Cardiff. 

The ranking, compiled by online estate agency Hatched, found Leicester had the lowest average house price of the cities analysed at £156,999.

With an average renovation cost of £77,000 bringing the cost of investment to £233,999 and a return on investment projection of 61 per cent, a monthly rental income of £2,176, giving an annual yield of 9.3 per cent, would mean it would take 8.5 years to pay off the renovation cost.

David Martin, chief operating officer at Hatched said: “It is worth noting that differences in property size and type - detached, semi-detached, terrace and flat - in each area can mean that the property availability and cost, and student rent potential can greatly vary.

“Living with others is preferred for most students, and so it is worth looking for properties that can house several tenants – ideally having between three and six bedrooms.

“This will not only supply the demand, but will result in multiple rental payments each month as steady income.

“Also, renovations may not always need to be overly intensive for this sort of investment. Changes may be more superficial, and require minimal expense.

“For example, unused or under-used rooms in student properties (such as dining areas and sometimes even communal living room spaces) can be easily transformed into extra bedrooms, resulting in more possible tenants and so a higher potential for rental income each month.

“The research has also highlighted that areas with potential do not have an obvious north/south divide, and are not confined to a specific area of the country, and so you are likely to be able to find somewhere close to home if you are looking to keep your investment local.”

Hatched took average return on investment (ROI) renovations costs for a range of home improvements from peer to peer platform Zopa and applied the average to come up with a 61 per cent overall ROI.

On this basis a property in Birmingham would have an annual yield of 8.8 per cent and it would take nine years to pay off the renovation costs.

In Leeds it would take 9.5 years to pay off renovation costs on an averagely priced house.

Yields on properties in Manchester and Liverpool were 7.5 per cent and 7.9 per cent respectively and in both cases it would take 10 years to pay off the renovation costs.

Hatched cite Oxford top of the worst for landlords, with average house investment of £670,108 meaning a yield of 3.9 per cent and an estimate that it would take 25 years to pay off the renovation costs.

But there is a very high student population of 29 per cent meaning demand for students lets is very high in this city.