I always tell Nottingham landlords, capital growth and yield are two phrases that are one and the same with property investment and can have a big impact on the long term results of your property investment.
Student letting is high reward (high yield) but high risk. The council imposed their Article 4 legislation a few years back, which means no more houses in the majority of the town can be converted into student accommodation. This however, is not the issue. There is in fact an oversupply of student accommodation in the city, with most students preferring to live in modern swanky apartments on campus than that of woodchipped wallpapered 8 bed Victorian houses with one shared bathroom and draughty single glazed windows.
Today’s students have a higher expectation of quality in their accommodation. They expect their properties to be ‘Lam and Mag’d with matching dark wood Ikea furniture, flat screen LCD telly on the wall and leather Sleigh bed’ (Lam = laminate floor and Mag’d = magnolia walls). Students will not pay £85 per person per week for a draughty old house, with mix and ‘not match’ second hand furniture that has come from a clearance sale, threadbare carpets and the famous wood chip wall paper.
Come the Summer, there will be student properties that don’t let. This is where the issue of Article 4 will kick in and potentially hurt the student landlord population. Landlords with an existing student property (they are called Houses under Multiple Occupation shortened to HMO’s) will be very reluctant to rent to a family in the year if it means they lose their HMO status. By putting a family in an existing HMO property, Article 4 rules mean you have changed the ‘use’ from a shared house (HMO) to a private dwelling. You would therefore need to apply to the Planning Department for planning permission if you wanted to put students in in the next academic year. Would you get planiing permission? Doubtful
One option is to drastically reduce your asking rent to the £70’s, even £60’s per week, making your Nottingham student let, the bargain of the week, for cost-conscious students. You could consider throwing some extras, like free Sky Sports or wifi or even a cleaner?
However, you will always be chasing your rent downwards over the coming years, as more and more purpose built modern halls of residences get built. If you are in the student rental game for the long term, one option would be to let the property go empty or void (this doesn’t affect the HMO status) this coming Summer, ‘Lam and Mag’ in July and August, take your trailer down to the Ikea in Eastwood .. make it show home style .. take some fabulous internal pictures (for future marketing) and launch the property back in September to the overseas Post grad students. It should go in days and at a full rent at £90 or even £95 per week and incentivise the post grads to keep the property ship shape when undergrads start looking in November for the next academic years. Again, if its top draw, it will go quickly and at full price.