It is time to invest in an Oxford student property

In last week’s article I set out the case for investing in property in Oxford as opposed to holding capital in savings accounts.  This week I’m asking: which type of investment property could provide the best income? Whether you are an existing landlord looking to grow your portfolio, or a first time investor making your first foray in to world of property, high among your concerns will be the rental yield from any potential investment. With Oxford property prices rising ahead of National trend and faster than rents, getting a satisfactory yield from your investment can seem tough.

There are many factors affect the rental yield you can earn:  for example the price of the property, the location appeal to tenants, the occupancy rate you achieve, the presentation of the property relative to comparable home and the costs of up-keep and maintenance. A good agent can help you with all these brain-aches, and help you maximise the value of your investment.  However, when considering your gross yield, there is a crucial question you should be asking when investing in Oxford:

 “Should I be investing in student property?”

For many landlords, the very thought of managing a student property conjures images of run-down houses with maintenance issues coming out of the woodwork and tenants who will damage the property at every opportunity. But is this the reality of becoming a student landlord?

The law states that any property that is occupied by three or more people who are unrelated (i.e. not in a couple or family relationship) must hold a HMO (House in Multiple Occupation) licence granted by Oxford City Council. HMO properties can range anywhere from upmarket flats in modern developments, all the way through to 6 or 7 bedroom Victorian townhouses. 3 bed+ Student properties in Oxford must invariably hold a HMO licence, which certifies the suitability of the house for multiple occupancy, ensuring that communal areas, kitchen/bathroom facilities and safety features are appropriate for the number of people living in the property.

The beauty of investing in a HMO is that rooms in the property are usually let on an individual basis, meaning that each tenant pays their own individual rent. The market value for rooms in shared houses in Oxford is significantly higher than the national average, meaning that the gross rental yield on a HMO property can far exceed that of the same property if it were let on a private residential basis. When we factor in the huge demand for student houses in expensive areas of Oxford such as Iffley fields, Cowley and Headington, investing in a student HMO could be your ticket to superior gross rental yields.

Do the numbers really stack up on student houses? Martin & Co in Oxford recently let a 3 bed family home in the popular student area of east Oxford near Cowley and Iffley Roads for approximately £1100 per calendar month. With the current market value sitting at around £525,000, this represents an approximate gross yield of just 2.5% for a new buyer - not a very attractive figure for any prospective buy-to-let investor. We also let an almost identical property, of the same approximate market value and just two streets away from the first property, to a group of four students. With one reception room converted to a bedroom and each student paying £487.50 per calendar month in rent, the total monthly income for the investor sits at £1950, representing a gross yield of 4.5% - nearly double that of the private residential let for an almost identical property in terms of age, quality and size.

There are of course costs associated with being a student landlord. For example, there is a cost of £699 associated with obtaining a HMO licence in Oxford, and the licence must be renewed annually if you are not a council accredited landlord at a cost of £187. However, allowing an accredited agent to manage your property will mean that your licence will only need renewing every five years. At Martin & Co. we save our clients time and money by using our accredited status to obtain five-yearly licences, and we process all the admin on behalf of our landlords.

Furthermore, maintenance issues can sometimes be more prominent in student houses, simply by virtue of multiple individuals using showers, cooking facilities and communal spaces. However, with the superior gross yields from HMOs, both these and licencing costs can be absorbed whilst still maintaining an enhanced monthly income.

Many landlords fear students, certain that their property will be damaged by careless and malicious damage. However, with the costs of University ever rising, students are increasingly viewing University as a financial investment in their future, and as such want to live and work as adults in quality accommodation – and they are willing to pay for it. And the best thing about student lets? You never have to worry about finding tenants again. Oxford city council estimate that up to 1 in 5 Oxford residents live in HMOs, with approximately 20000 students searching for the perfect home to share with friends each academic year. With this many tenants desperate to rent, a well-maintained student HMO with 4-5 bedrooms for around £450-500 per person per calendar month will be snapped up year after year.

So whatever your interest in the Oxford property market, don’t under-estimate investment in our city’s student housing, a brilliant way to optimise your yields, balance returns across your portfolio whilst protecting your valuable capital.