Student Letting
London most profitable for student letting

parents are looking at the pros and cons of purchasing a property for their child to live in while studying. New research from Landlord Mortgages, the UK’s largest specialist buy-to-let broker, shows that parents who choose to buy could make a profit of almost £20,000 over the three-year term of their child’s degree(see table below).

Table One: Top ten University towns’ average property prices and projected profits

University Town Average Property Price (Terrace) Capital appreciation over3 years Saving on ren over3 years TOTAL PROFIT London £299,584 £17,403 £1,485 £18,888 Surrey (Guildford) £219,642 £12,759 £1088 £13,847 Bath £216,700 £12,588 £1074 £13,662 Bristol £162,742 £9,454 £809 £10,262 York £155,544 £9,036 £771 £9,806 Birmingham £123,852 £7,195 £614 £7,808 Leeds £117,909 £6,849 £584 £7,434 Warwick £113,941 £6,619 £565 £7,183 Nottingham £106,909 £6,210 £530 £6,740 Manchester £98,898 £5,745 £490 £6,235

For example: If a three bedroom terraced property was purchased for £299,584 in London with a three year fixed rate buy-to-let tracker mortgage at 4.5% and two bedrooms were rented out, a parent could save £1,485 in rental payments while making £17,403 in capital appreciation.

Parent’s whose children choose to study in London can make the most profit if they choose to buy and rent out two of the three bedrooms. However, parents of students in Guildford (£13,847) Bath (£13,662) and Bristol (£10,262) can also expect to see healthy profits of over £10,000 in just three years.

Chart one: property prices and projected profit over three years



Other Advantages:

Purchasing a property for your child while they are at University also holds other advantages such as control over the security of their accommodation, type of flat mates and level of rent. Owning a property your child shares with other tenants also means that they can act as your agent ‘on the ground’ and solve any issues as and when they occur. And the property doesn’t need to be sold once the child has left university as, if a parent chooses to, they can continue to let it out to students and use it as a long term investment for their retirement.

Lee Grandin, Managing Director of Landlord Mortgages, comments:

"With stiff competition for rented accommodation in university towns, investors are faced with a captive audience, meaning that this type of buy-to-let investment can prove highly profitable. More than anyone else it is the student who knows what their peers want, and in their child, parents have the most qualified researcher.

"It is true that property prices are high, particularly in London. However there is still definite scope for profit, with predicted house price growth and steady rental yields. These two factors combined make for a solid investment and one well worth considering before your child starts down the road to higher education."

Foot Notes:

1 = Capital appreciation and total rent saving combined.

2= Top Ten List of UK Universities – by results – May 2006.

3 = Property prices sourced from the Land Registry based on a terraced house in the same postcode area as the University campus.

4 = House price predictions are based on the Halifax house price index (1.9% average since Q1 1983), but adjusted to take in current estimates.

5 = The mortgage repayments are based on a Landlord Mortgages best buy buy-to-let repayment mortgage at 4.5% for a three year fixed rate. The rent obtainable for the two spare bedrooms is then factored in and taken off the mortgage repayments. Finally, the amount the parent would need to pay to rent a single bedroom for their child is compared to the amount of the mortgage, they need to pay and a saving determined.

Buy To Let Property
Your Involvement
Buy To Let Tips