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Student Landlords: Funding Your Investment

With more than 500,000 people applying for higher education courses in the UK, the need for student accommodation is evident. There is an opportunity for student landlords to achieve success due to the volume of demand in the market, but there are challenges that must be overcome. One of the most critical issues for HMO landlords is funding your property investment

The type of property that you are considering investing in will impact on how you fund your investment into the student housing market.

Buy-to-let mortgages are not applicable for purpose-built student accommodation

Purpose-built student accommodation cannot be financed with a traditional buy-to-let mortgage. An investor looking to buy this style of accommodation will need to pay by cash or obtain a commercial mortgage. Depending on your finances, this may present a barrier, but it should be possible to obtain funding in this manner.

The level of demand for student accommodation means that commercial lenders realise that there is a market for this style of property. The lender will review each application on its own merit but if you can make a compelling argument, such as showing a strong financial background, a plan to promote the property and even a portfolio of comparable properties, obtaining a commercial mortgage to purchase student accommodation should be within your means.

HMO mortgages often carry specific terms and conditions

If the property you are considering investing in for student accommodation is a HMO, it is likely you will need to obtain a specific HMO mortgage. This style of mortgage isn’t provided by every lender, so you may need to carry out more research to find a suitable provider for this style of loan and property.

You will also find that the terms and conditions associated with HMO mortgages often contain specific terms and conditions. These will often detail the deposit or what the tenancy agreement details. If you require any guidance on the intricacies of HMO mortgages, it is best to a specialist HMO mortgage advisor.

Then again, you may be looking at investing in a standard property and letting it to students. With this strategy, you should find that a standard buy-to-let mortgage may suitable but be aware that many lenders now impose stricter criteria on their buy-to-let mortgage. Lenders may also want to know about licence requirements regarding your HMO property.

Any investor that has a portfolio of property will have to provide details with respect to all the property they own to let. It is no longer enough for a landlord or investor to indicate that they will make a positive return on the property they intend to buy, they must show that all the properties in their portfolio are performing well.

Mortgage lenders have been placed under closer scrutiny with respect to buy-to-let mortgages, perhaps in tune with the increasing pressures on landlords and investors introduced with the aim of stimulating the first-time buyers’ market. It is essential that investors and landlords know the opportunity provided by the student housing market but also the difficulties associated with obtaining funding.

It is always best to speak with an expert before committing to financial investment of this nature. At Student Haus our team is happy to discuss properties with you that may be suitable for student lettings, the rent achievable and anything else that may be of interest to you in regards student HMO management.

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