Landlord Insurance Tips - Pros & Cons of Letting to Students

Landlord Insurance Tips - Pros & Cons of Letting to Students

The UK university population boasts some of the oldest and most prestigious establishments in the world, attracting huge demand for places from international and homegrown students alike.

The popularity of further education continues to drive the student let market, delivering resilient returns year-on-year. Yet, letting to students is not without additional risk and poses unique nuances that are not present with the average professional tenant.

With this in mind, Landlords must enter the student market with their eyes open, understanding both the advantages and risks - It is also important to purchase specialist Student Landlord Insurance to ensure you are covered correctly for all eventualities.

The Student Let Property Market

Whilst the government introduction of university tuition fees in 2012 caused a steep decline in student enrolment of 7.4 percent, this has had a little impact of the student rental demand.  According to estate agents, Savills, the number of students who rented in 2013 compared to 2012 rose by nearly 11,000, representing year-on-year growth of circa 2 percent.  The rise of student tenants was accompanied by a growing demand placed on landlords to increase the quality of the available accommodation to match the increase in tuition.

In the years following the rises in university tuition, student enrolment has steadily recovered with nearly half a million new students enrolling for the 2014-2015 academic year — an increase of 4 percent, according to the Higher Education Statistics Agency. More than 2 million students are attending university during the 2014-2015 academic year, with tuition costs and limited university housing persuading nearly 70 per cent to let.

Consistent Demand

Despite periodic troughs in enrolment numbers, the consistent international and UK student population should ensure that the student rental market remains resilient. With a regular and dependable reserve of potential tenants, landlords that let to students can boast an incredible un-occupancy rate of just 3 per cent, according to the Financial Times. The trend of slowly rising student enrolment and the number of students looking to rent is predicted to continue, according to CBRE Global Research and Consulting, all of which makes student letting a smart investment.

Pros of Letting to Students

The student property market has displayed marked growth in each of the past four years, with an increase of 1.6 per cent for 2013 to 2014, according to property consulting firm Knight Frank. In addition to the reliable, steady growth, the market offers these four additional benefits for landlords who let to students:

  • Student tenants tend to have slightly lower expectations in terms of provided appliances, furnishings or decoration than professional tenants.
  • As a part of their applications, you may make it a requirement that student tenants have their parents or guardians act as the guarantors for their leases. In the event that the students cannot pay their rent for a particular month, their guarantors will be then obligated to make the payments.
  • The potential rental yields can be higher than other housing lets due to competitive pricing when compared to university housing costs and the ability to include a greater number of multiple tenants.
  • With an excess demand for student housing, it should be relatively simple to find student tenants. Depending on what universities are nearby, you may be able to advertise on their student housing sites.

Potential Cons of Letting to Students

Despite the dependable growth, high occupancy rate and the potential for higher rental yields in the student property market, there are four key risks for landlords.

  • Ongoing maintenance bills tend to be higher than they are with professional tenants as students can be tougher on the appliances, decoration and furnishings due to their lifestyle issues and the short terms of their leases.
  • It may be possible that there are stretches of time where you have no tenants due to holidays or a gap between academic years.  This can impact rental income, but also lead to un-occupancy terms being applied to your Landlord Insurance policy.
  • There is a medium term threat from universities and large student property providers such as Unite, providing purpose-built private student accommodations that could reduce the demand for private lettings.
  • If your student tenants are particularly noisy, you could be penalised by your local council, as you have ultimate responsibility as the Landlord.

How To Prepare When Letting to Students

As a student landlord, there are a number of key preparations, best practices and requirements you should consider before you let to students:

#1 Information Packs

Provide new tenants with a clear, detailed information pack concerning local amenities and their responsibilities for the care of the property. Include rules specific to students such as: Do not climb on the roof, do not burn candles, do not light fireworks by the property, etc.

#2 Inventory

Before the new tenants move in, take a detailed inventory of the condition of appliances, decoration and the general structural quality of the property, such as walls, floors, doors, etc. Include a clause in the provided packet of information outlining that any damages, repairs or replacements are the responsibility of the tenants.  It is best practice to take photographs and if possible, a video of the property conditions before tenants move into the property.

#3 References

Require that each student supplies detailed references.  This should include details of any current employment, or, if he or she cannot, you should require that he or she has a guarantor accept financial and legal responsibility for him or her.

#4 Background Checks

As a part of the vetting and background checking process for a potential tenant, contact the student’s university to reference and identify and previous housing issues that may have led to him or her being evicted from university housing.

In addition to other checks and precautions, there are two legal regulations you must comply with:

#1 Immigration Checks

If you are a landlord in the following areas, you are obligated by The Immigration Act 2014 to verify that your tenants are legally allowed to live in the country:

  • Birmingham
  • Walsall
  • Sandwell
  • Dudley
  • Wolverhampton

#2 HMO Licensing

As most student accommodation involves multiple tenants, you will need to ensure that your property complies with the House in Multiple Occupation (HMO) regulations.

HMO properties typically fall into two categories:

1: Standard HMOs – Whereby at least three tenants will live at the property forming more than one household, sharing toilet, bathroom and / or kitchen facilities.  (A household is defined as a single person or members of the same family who live together).

2: Large HMOs – Properties which are at least three storeys high, occupied by at least five tenants, sharing toilet, bathroom and / or kitchen facilities.

HMO Licencing will typically demand the following requirements:

  • Install smoke detectors for licensed HMOs.
  • Carry out annual gas safety checks.
  • Check electrics every five years.
  • Ensure the property is not overcrowded.
  • Provide adequate cooking and washing facilities.
  • Make sure communal areas and shared facilities are clean and in good repair.
  • Make sure there are enough rubbish bins/bags.
  • Purchasing the appropriate HMO Insurance policy specifically for multi-tenanted risks

Student Let Insurance

Standard Let Property Insurance may not always include malicious damage by tenants.  Many property owners see this as a key risk when dealing with students and it is vital that you check your individual policy wording carefully to ensure that your own cover meets your specific requirements.

To ensure that your property investment is adequately protected, it is wise to purchase specialist student let property insurance. This specific form of cover can provide peace of mind for complications involving:

  • Cost of repairs to the building, either caused by tenants or the elements
  • Legal expenses for any court cases between yourself and your tenants
  • A percentage of compensation for the loss of rent
  • Compensation for repairs or replacement for items that are stolen
  • Cover provided for the property
  • Liability cover provided for you, the landlord

These six items do not reflect all of the possible inclusions that Student Landlord Insurance can provide you as a landlord and best practice is to tailor policies to your exacting requirements.

FREE Property Insurance Review

Insync specialises in cover for all types of let property.  Whether you need Student Landlord Insurance or a bespoke HMO Insurance policy, our team of expert Gurus can help you locate the right level of cover at the right price.