Student landlords in the Midlands and North see best yields – study

21st October 2020

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Student landlords in the Midlands and North see best yields – study

Following recent reports on the resilience of the purpose-built student accommodation (PBSA) sector, which has seen a net increase of 2.6% in 2020.

This is underpinned by further research by Howsy revealing that properties close to the campus of the University of Leicester fetch the highest yields of 6.56%, followed by Aston University in Birmingham (6.5%) and the University of Leeds (6.41%).

Other northern areas with yields well above average include Nottingham (6.39%), Newcastle (6.3%), Liverpool (6.1%) and Manchester (5.2%).

A new report from The Mistoria Group, specialists in high-yielding property investment, backs up this data, with findings showing student property in the North West (particularly HMOs) are significantly outperforming standard buy-to-let, on both yields and return on investment.

The research shows that the average gross cash return before any charges and voids on HMOs, with student or young professional tenants over the last five years, have increased to 11-13%, compared with an average gross cash return of 6-8% on a standard BTL in the North West.

Over the last five years, HMO investors have received a considerably higher return than standard BTL investors – an average of 10-15% in comparison to 5-8% when applying a gross return to both.

James Forrester, managing director for StripeHomes, said: “From the research we can see that the student market is still incredibly buoyant and a great investment opportunity for people. With policy changes to increase student numbers of the back of covid-19 we can see that the market is only going to go in one direction and now is an ideal time to invest.”

According to Mish Liyanage, managing director of The Mistoria Group, HMOs are an important part of the UK housing market as they offer students affordable accommodation.

“We are seeing growing demand for HMO student property in the North West because it offers excellent yields, high occupancy rates and good capital growth,” he says.

“HMOs in Manchester, Salford, Bolton and Liverpool have become very popular with investors, as both cities have a high population of students and young professionals. In both Liverpool and Bolton, Article 4 is not in operation, so investors can convert a family home, or a home used by a single person (C3 -dwelling house/flat) to a small shared house of up to six unrelated individuals (C4 –HMO), without any planning permission.”

“However, every investor needs to be cautious and ensure they buy in the right street, as yields can vary dramatically by postcode. HMOs within walking distance of a University, or just a short bus or train journey away, will usually command the highest rents.”

Liyanage says if investors buy HMOs in the right location, right market and from the right agent in these areas, they will achieve much higher yields than a standard buy-to-let in the Midlands or South East.

“Hence, HMOs provide a secure and an excellent performing passive investment to supplement your monthly income,” he concludes.

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