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Best areas to invest for student HMOs

Property investors often find that they can achieve a higher rental yield with student accommodation than they can with a standard buy-to-let.

Of course, this isn’t always the case, and the success of a student let depends on a variety of factors including the type of property, the size of the property, and most importantly, the area that the accommodation is located in.

In this article, we will find out a little more about where the most profitable areas in the UK are for investing in student HMOs.

Factors to consider when choosing where to invest in student property

If you want to get the best returns on your investment you should think carefully about the best area in which to invest in a student HMO.

Of course, you’ll want to choose a university town or city. You’ll then need to research which areas within the city are student hotspots and what the reputation of each area is like.

Students usually live in inner city areas, preferably within walking distance of most places they need to get to, or somewhere with excellent transport links.

Most students want to live within walking distance of the university campus, local amenities, and nightlife.

It’s also a good idea to look to the future and research up-and-coming universities and student hotspots where demand could be set to grow.

For example, Bolton is a relatively small university town and house prices in the area are low, but Bolton university is one of the fastest-growing higher education institutions in the UK and it is targeted to double its student population over the coming years.

Which are the best areas of the UK to invest in student property?

It is generally agreed that when investing in any type of buy-to-let, higher rental yields can usually be achieved on properties located in the North of England because of how much cheaper property is to invest in up north.

Property Wire recently published an article about research that was carried out by Paragon Bank into the top 10 locations in the UK for investing in student property based on the areas where investors generate the highest rental yields.

The research found that the top 10 locations are:

  1. Swansea

Average property price: £194,758

Rental yield: 9.56%

  • Hull

Average property price: £119,538

Rental yield: 8.60%

  • Plymouth

Average property price: £267,287

Rental yield: 8.41%

  • Liverpool

Average property price: £225,178

Rental yield: 8.25%

  • Coventry

Average property price: £290,685

Rental yield: 7.91%

  • Chester

Average property price: £281,796

Rental yield: 7.88%

  • Stoke

Average property price: £119,773

Rental yield: 8.21%

  • Lincoln

Average property price: £217,615

Rental yield: 7.82%

  • Preston

Average property price: £252,850

Rental yield: 8.01%

  1. Leeds

Average property price: £250,009

Rental yield: 7.62%

Interestingly, as well as the majority of the areas being in the North of the country, most of them are also within smaller university towns and cities. Most of the areas listed are home to just one university and have smaller student populations than you would find in major cities.

However, one major city with multiple universities which consistently appears in lists of the top areas for investing in student property is Liverpool.

Some reasons why these smaller university towns and cities are outperforming major cities include because there is less property available in the area, property prices are lower, and there is less competition between investors. All these points could help to drive up the rental yield that can be achieved on the property.

Are student HMOs a good investment?

Student Haus is part of the Mistoria Group, and we are a team of letting agents that specialise in HMO student property letting and management in the North West of England, particularly in popular university towns and cities like Liverpool, Manchester, and Salford.

We have found that investor enquiries for student accommodation in Liverpool, Salford and Bolton have surged over the last six months, up 21 per cent from UK and international investors.

More and more investors are now investing in student HMOs and profiting from higher rental yields as a result.

Mish Liyanage, managing director of the Mistoria Group, explains: “Without doubt, investors achieve considerably higher yields with property let to students, compared to those let to non-students in the same town or city. 

“For example, student landlords in Liverpool made an average gross rental yield of 13 per cent in the third quarter of 2021, compared to nine per cent for those who did not let to students. Student property can either be similar to a normal buy-to-let, where the whole property is rented between friends who co-habit or a student HMO where students rent each room individually on their own tenancy agreement. A property is deemed an HMO if at least three tenants live there, forming one household and sharing bathroom or kitchen facilities. 

“Investors can currently acquire a four-bed HMO for students and professionals, fully refurbished and furnished and tenanted for the coming year, for less than £175,000 in Liverpool.

“Investing in student HMO accommodation offers a long-term  option, as the property is highly likely to be in constant demand throughout the calendar year.”

Demand for student properties to rent in the UK only looks set to grow as the country remains a very popular location to study with overseas students. According to UCAS, applications from international students are expected to increase by almost 26 per cent by 2026.

Here at Student Haus, our team of specialist letting agents works with property investors across the North West of England including Salford, Liverpool, & Bolton.

We offer a range of services for student landlords including a let-only service and a fully managed service.

If you require help or advice with investing in a student HMO, don’t hesitate to get in touch with our team of specialists by calling us on 0161 694 6427.