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Student lessons

Investment in property continues to be a popular alternative to equities, fuelled by low interest rates, a housing market that continues to astound us in its capacity for growth and controversy, suspicion and fear over the effectiveness of our pension planning.

Buying to let, which five years ago was considered to be a risky enterprise – even a little shady, perhaps – has gained a respectability that has made it the fastest-growing sector in the mortgage market. Now everybody&#39s doing it, from teachers to students and professionals to pensioners.

Like all success stories, the buy-to-let phenomenon is subject to the usual discussion and predictions about its demise. It does appear that some areas of the country have reached saturation point, with some landlords having to reduce rents to avoid properties sitting empty.

On the other hand, the much heralded housing market collapse has still failed to materialise, interest rates remain low and mortgage companies are tripping over themselves in their attempts to gain a share of the market.

For evidence of this, you only have to note the substantial increase in the proportion of remortgages in the buy-to-let sector – up from 16 per cent to 19 per cent, according to the latest Financial Adviser Confidence Tracking Index issued by Paragon Mortgages in October.

With at least 70 lenders offering buy-to-let mortgages, resulting in extreme competition for business, there is no doubt that the opportunities are there for investors to fund their buy-to-let purchases from a range of extremely competitive deals. The key to success seems to be finding a healthy pool of potential tenants to avoid every landlord&#39s nightmare – properties sitting empty.

The provision of accommodation for students has already proved to be a good investment for many existing landlords. Long-term tenancies are out of the question but there is at least the knowledge that students will be committed to at least one year&#39s accommodation and in many cases two, three or even four.

Another advantage of the student market is that it is relatively easy to pinpoint. A first port of call should be the university or college, many of which have accommodation officers who have the task of finding their students somewhere to live. Prospective landlords can get a good idea of the areas that are popular with students and lay the groundwork for becoming a landlord the accommodation officer is happy to recommend.

Some parents choose to buy a property for their son or daughter to live in while at university and share with a friend or friends. The advantages of this approach are many and are not confined to finances. The parents have the peace of mind of knowing that their offspring is in a clean, safe, location with a guaranteed tenancy. They can also feel a little more confident that the property is in good hands. There are material advantages too. The money the son or daughter would have paid in rent is staying in the family. The tenants are less likely to renege on rental commitments because a relationship has been built up and are more likely to look after the property. Good student accommodation is much sought after and even after the son or daughter leaves university, there should not be a problem finding tenants, as often they will pass on a property to friends in the year below.

If there is no personal connection with prospective tenants, then landlords must be aware that students are not the best tenants and they must expect a fair amount of wear and tear. Regular maintenance is essential to ensure that little repair jobs are not left undone and turn into big ones. Generally, student lets tend to attract higher rents than other properties to balance the fact that maintenance is likely to be more costly.

One bonus is that students tend to be less demanding and furnishings can be kept to the minimum and do not need to be of the standard expected by a family or young professional. A garden is probably unnecessary and is best avoided but a good bathroom and decently sized “communal” rooms such as kitchen and lounge are essential. The property must be within easy access of college and local amenities and storage space for bikes could be a real asset. It is important to consider the neighbours. However respectable and responsible the tenants are, they will generate noise, have lots of visitors and keep anti-social hours.

The secret to success with a student let is much the same as with any other buy-to-let property – location is the key.

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