Warning that student landlords face stricter rules

YourMoney.com review, insisted there were some great investment opportunities for those who were prepared to take a chance.

“It’s not as risky a move as you might think,” he said. “It’s not quite the hard-partying picture many have of student life.”

Students took their studies much more seriously, and many also worked to see themselves through the semester.

They were no longer the reckless tenants many believed them to be.

“Don’t miss out on a great investment opportunity and sky-high yields because of tenant type,” Mr Cooper added.

Indeed, Simple Landlords Insurance found that, of 20 major university centres, Durham and Warwick came out top for rental yields, with 11.5 per cent and 10.3 per cent per year respectively.

Birmingham, with Selly Oak a favoured location, was 11th on 5.63 per cent.

But landlords letting multi-unit properties and those thinking about it should be aware – the rules are changing from October 1.

The Housing Act 2004 defined houses of large multi occupation (HMO) as being three storeys high, having at least five tenants living there, forming more than one household, and sharing toilet, bathroom or kitchen facilities. Mandatory licences are required. The aim is to protect tenants in HMOs from poor conditions, with councils checking the quality of the accommodation, that landlords are suitable persons, there are not too many people living there, and HMOs considered high-risk are monitored.

However, under an order due to come into force next month, the three-storey element is being removed, so extending the regulations.

New mandatory conditions to be included in licences are also set to be introduced, prescribing national minimum sizes for rooms used as sleeping accommodation and requiring landlords to adhere to council refuse schemes.

Housing provider Paradigm has suggested that a further 177,000 properties across England will now have to apply for a licence. Others believe this may prove a very conservative estimate especially as flats above commercial properties will be captured under the changes.

Fleet Mortgages cites HMO advantages for landlords as a potential for higher returns – the combined rent of individual rooms usually generates a higher rental yield than the same property would as a single-family home; less rental void – if one tenant moves out, other rooms are still tenanted; less exposure to arrears – if one tenant fails to pay rent, the other tenants will still be doing so; while tenant demand for flexible, affordable housing is increasing.

It lists the disadvantages as more planning requirements compared to standard buy-to-let, such as fire safety measures, provision of safety certificates for gas and electrical appliances, as well as responsibility for cleanliness and repairs in the communal areas of the house; local authorities can take action against landlords they believe are non-compliant ; and increased administration through having to comply with extra regulations and managing multiple tenancy contracts.

So weigh up the pros and cons – one to ponder. Trevor Law is managing director of Eastcote Wealth Management, chartered financial planners, based in Solihull. Email: tlaw@eastcotewealth.co.uk The views expressed in this article should not be construed as financial advice