A new study has found that landlords can benefit from great returns if they invest in a property in certain university towns.
With low property prices and rising demands, landlords have been able to take advantage of 7% returns per year.
However, experts have made it clear that this is not about getting rich quickly. This is because a certain knowledge of how markets operate in specific areas, the demands of tenants as well as the laws and regulations that govern the rental sector.
The best returns can be seen in Sunderland where landlords can achieve a yield of 6.9% while it is also the cheapest place to purchase when it comes to the top 20 student towns with the average property price sitting at £90,000.
Manchester follows closely, with an average price of £135,000 and returns of 6.2% all of which is boosted by a healthy student population.
Birmingham has a number of popular universities in Aston and the Birmingham City University and here investment costs are low and the demand from students is high. The average price is £116,732 and with the high demand, yields of up to 4.5% a year can be achieved.
Demand is always high for rental accommodation in certain cities but if landlords are looking to get rich quick they need to understand the market they plan to move into. This is even more important following the decision to leave the EU as it could result in demand dropping due to a reduced number of international students. Some universities will feel the effect of this more than others and understanding this is crucial.
Investing in a peer-to-peer lender could be an option and as interest rates are low, investors will have to make their money work in the best possible way. Banks offer poor returns and so more investors will look at alternative options for investing. This is where property has always been one of the best asset classes because yields are competitive throughout the country.
However, opting to invest in this way does come with its risks because investing in the right area is key. London for example offers extremely poor returns as a result of huge price increases in property prices. In London alone, six of the worst ranking universities for rental returns can be found with the lowest return being around 1.3%.
This is a period where rates are notoriously low and the market is deemed to be volatile and so it highlights the importance of choosing a student property investment that is stable and provides an income that is reliable while also offering excellent capital growth.
It seems as though things are changing in the property market as it was all about capital returns but now things are turning more towards total returns investment. Investors are now looking for an income they can rely on every month.