Research reveals top UK university towns and cities for student buy to let

St Andrews is the top university town or city in Britain in terms of offering yields to landlords with the potential of achieving up to 12% per annum, according to new research.

Students don’t always have the best of reputations as tenants, but the new league table from Simple Landlords Insurance reveals that letting to students can offer good returns and it is not necessarily the top performing higher education locations.

Oxford and Cambridge, for example, consistently appear at or near the top of university rankings but they don’t offer the best yields for landlords.

After St Andrews in Scotland come Lancaster, Loughborough and Birmingham with the potential to achieve 10% per annum and then Exeter, Durham, Sussex and Nottingham with 9.5%.

Alex Huntley, head of operations at Simple, Landlords Insurance, explained that the research took the top universities in the country ranked by the Complete University Guide and examined which offered the smartest investment opportunity.

‘While the academic league tables are always led by Cambridge and Oxford, our study shows that neither of those locations offers the strongest yield for a buy to let investor. Unlike other studies, ours centred in on the house prices in the streets where students at each of the universities actually choose to live,’ she explained.

‘It compared the cost of buying one of these properties with the rent that is actually paid by students studying at the establishments in question,’ she added.

The research looked at Largo Road in St Andrews where fairly large houses cost an average of £300,000 and five students paying £150 a week each could earn a collective £36,000 a year in rent for a landlord.

Meanwhile Oxford offered the lowest value of the universities covered by the study. Properties in popular student area of Iffley Road change hands for about £720,000 and could net a yield of 3.33% at £2,000 a month. That makes the high initial outlay look steep, with much less lucrative returns.

The University of East Anglia in Norwich, and Cambridge, Bristol and Surrey universities all feature towards the bottom of the table.

“It goes to show that with some research, there are some great investment opportunities out there for people prepared to target the student market. Rising educational costs means that more and more students are having to work to support themselves during university, meaning that, many are there to work rather than just party, and often don’t deserve their bad reputation,’ said Huntley.

She explained that one way for landlords to mitigate the risk is to invest in an area they know for a student they know. ‘We’re seeing more people with children at university choosing to invest and buy a property rather than see rent going down the drain,’ she pointed out.

‘The real key in renting to students is to make sure you’ve got the right insurance. Look into accidental and malicious damage cover, for instance, and make sure you’re inspecting regularly so small issues don’t become bigger, more expensive problems,’ she concluded.

An example of a landlord who went down the student route is Deborah who had a son and daughter both studying medicine with five years of university ahead of them. She and her husband decided to buy houses which they could use and get income for sharing with other students.

‘We wanted them to be settled somewhere decent and safe, and it just so happened we had enough savings to pay the deposits on both properties and get two buy to let mortgages. Renting to our children and their friends meant we started out with groups of instantly vetted students,’ she said.

‘They are only 19, some of them have literally never even cooked for themselves. They see me as a mother figure and that relationship makes them, and their parents, feel secure. They also know I care more about them as tenants than an anonymous investor might,’ she explained.

‘Our student houses saw both of our kids through university, and we’ll have made enough when we sell both properties to give them a leg up on the property ladder. I think buy to let mortgages for your children while they study can be a great option for any parent, at least your child’s rent is contributing to the mortgage and you’ll benefit twice over,’ she added.