Hello Readers,
As we come up to the start of the new academic year, this could prove a real opportunity for the savvy investor!
What am I going on about? Well, here are a few of the headlines:
The Telegraph:
“War on landlords leaves 250,000 students without a room”
The Times:
“Students to start term in hotels or bunk beds”
The Financial Times:
“British university towns grapple with student housing shortage”
Inews:
“Students left in ‘nightmare’ accommodation as UK cities short of 620,000 beds by 2026”
Evening Standard:
“Student housing crisis looms as landlord Unite says properties already 98% full”
Wow – these are some staggering facts, but what’s happened to cause this situation?
With Medway being a town with a large student population this drop in student accommodation is something the Home Share team have experienced as demonstrated by a spoke in applications from students.
In short, there was a shortage of purpose-built student accommodation before the pandemic and the pandemic has hit the industry hard with around 22,000 new beds delivered in 2021 and just 15,000 in 2022.
I also think that the rental reform bill’s proposition to replace Assured Shorthold Tenancies with periodic tenancies doesn’t help the certainty of the situation.
This shortage presents a real opportunity for HMO landlords and here are a few points to consider:
- Rental returns are typically higher compared to standard rentals.
Despite the increased expenses related to maintenance and management, adopting a pricing structure based on individual rooms generates significantly greater rental earnings than leasing the property to a single household.
- Instances of vacant periods are extremely rare.
The continuous influx of new students into the market maintains robust demand. Although the academic calendar typically spans from September to July, it is customary for students to commit to a 12-month rental agreement.
Moreover, due to the proactive nature of students planning their future accommodations, new tenants are usually secured well in advance.
- The stability of rental income is usually quite reliable.
Student tenants generally exhibit responsibility in paying rent, often supported by grants, part-time employment, or parental assistance. Landlords often establish joint and several liability among students for the entire property rent.
This arrangement ensures that if one tenant departs or fails to contribute, the remaining tenants are obligated to cover their portion. Additionally, for an added layer of financial security, landlords have the option to request parents to act as guarantors.
What do you think? This is certainly something that I have been discussing with a few new investors over the past month – it’s an opportunity for sure!
Hasan
