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Buy-to-Let Watch: Do your homework on student BTL


Student property is still a lucrative market but it is important to make your clients aware of the restrictions affecting it

Can you believe it is already September?  Summer holidays are over (you can almost hear the sigh of relief from parents across the country) and this year’s crop of first-year students are packing their belongings and getting ready to start university life.

With the buy-to-let sector taking a hit over recent months, investors who are still keen to boost their portfolios – yes, they are still out there – will understandably flock to what look like the easiest and most lucrative investments, of which student property is always deemed one.

Indeed, according to latest figures from Ucas, over half a million people entered higher education in 2015 – 16,100 more than the previous year and the biggest number ever recorded by the higher-education body. Assuming there are similar numbers this year, many of these students will be looking for accommodation. It is a booming sector and one that shows no sign of slowing.

However, it is important that your investor clients understand the pitfalls and challenges associated with student property.

First, of course not all lenders will lend on student property. For some reason students make lenders nervous, so, while the products available have similar rates, a number of lenders will outright refuse to lend on a student property.

Those that do lend are specific about the types of property they will lend on. Woolwich and Abbey, for example, are not keen on houses of multiple occupation, particularly those that require a licence (HMOs with five or more tenants or where the property consists of three or more storeys require an HMO licence).

If your client is looking for a larger HMO – and with yields around the 8–10 per cent mark, many will be – specialist lenders are a good bet. Axis Bank, FHL, Fleet Mortgages, Kent Reliance, Paragon and Precise are all leading the way in the HMO sector.

Changing times

The type of property your client chooses affects not only its ability to attract tenants but also its chances of getting a mortgage. Student digs are not like they once were. If you are thinking of TV show The Young Ones and a run-down two-up two-down on the edges of town, think again. Many students, particularly those from overseas, are seeking purpose-built apartments with their own facilities. Gone are the days of allocating cupboard space and cleaning rotas on the fridge.

However, many lenders have stipulations not just for new-builds but also for tower blocks. Nationwide, for example, will not normally lend on properties in buildings with more than five floors.

Student property is still a lucrative market provided the right due diligence is undertaken. However, it is important to make your clients aware of the restrictions affecting this sector.


Ying Tan is managing director of Buy to Let Club


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  • Peter Turner 9th September 2016 at 5:16 pm

    Think carefully before making a recommendation about whether you are recommending a particular loan for a specific purchase, rather than a Collective Investment Scheme as the latter will almost certianly need you to be authorised to give investment advice and even then likely to be lawfully marketed only to sophisticated investors.

    If your client is just buying a property in their own name for investment consider whether the loan is regulated. A personal loan will fall under the Consumer Credit Act whilst a mortgage on a property which they or a close relation live in will fall under MCOB.

    If it is neither, put in writing to your client that it does not and that they therefore have no recourse to FOS or the FSCS in respect of your advice on the matter (and keep a copy).