Cash in on the Northern property boom as our experts reveal the university city that offers landlords a huge 14 per cent annual return

With its nice transport hyperlinks, bustling nightlife, cultural scene and excellent universities, it is no surprise Glasgow is common amongst college students and younger professionals.

For property buyers it additionally has an attract. The Scottish metropolis is the place landlords can count on to get the perfect returns on their funding, in keeping with new information. That is due to excessive demand from tenants and property costs which can be extra inexpensive than most different main cities.

Landlords can obtain a wholesome 13.92 per cent annual return by investing in a property let to college students, figures from property agent comparability web site GetAgent recommend. Glasgow can also be one of many UK’s most student-populated cities, with greater than 185,000 throughout its six increased training establishments. Newcastle and Durham within the North East are in second and third place, providing returns of 10.7 and eight.8 per cent respectively.

Home costs in central Glasgow are £231,243 on common, says GetAgent, which analysed Land Registry and its personal buyer information. That is in contrast with the common UK home worth of £285,000. 

A 3-bedroom home in Glasgow, maybe with one reception room transformed to a different bed room, would usher in a complete common hire of £2,684 a month based mostly on 4 college students every paying £671. This might complete £32,200 a yr, a yield of 13.9 per cent. Must you go away it as a three-bedroom home, you’ll obtain a yield of seven.7 per cent, though college students will probably pay the next hire to have a lounge.

Yield, or return, is calculated by dividing the annual rental earnings by the property’s worth then multiplying it by 100. Nonetheless, it would not embody prices reminiscent of mortgage curiosity, insurance coverage or upkeep. These prices ought to all the time be included when estimating returns to see whether or not it is worthwhile. For instance, borrowing £170,000 for a £231,000 property on an interest-only mortgage at 5 per cent would scale back your annual yield from 13.9 to 10.2 per cent.

Consumers of pupil lodging are usually both established buy-to-let landlords on the lookout for rental earnings and capital development, or dad and mom who purchase a home for his or her baby to stay in whereas at college – to permit them to stay extra comfortably and doubtlessly earn cash.

Pamela Aitken of the Glasgow gross sales growth group at Savills, says the town’s recognition reveals no signal of waning. College students usually keep on after graduating, due to good employment alternatives within the space. Barclays and JP Morgan are amongst giant banks within the metropolis.

‘The relative worth of properties in and round Glasgow, coupled with the rental yields these can generate, is actually a pretty proposition for the financial institution of Mum and Dad, particularly when considered as a longer-term funding with graduate retention charges within the metropolis at 41 per cent,’ she says.

Additionally providing the chance of wholesome returns are Newcastle upon Tyne and Durham. Each are house to prestigious universities which can be a part of the Russell Group. Dundee and Edinburgh full the listing of the highest 5 pupil places providing the best yield – every round 7.9 per cent.

Properties within the North are usually extra inexpensive and people in central components of cities near outlets, bars and eating places can command excessive rents – providing landlords the next yield in comparison with properties within the South the place home costs are considerably increased. For instance, in Brighton the common property worth is £526,176 and the common hire per yr (based mostly on a four-bedroom property) is £31,896. This rental earnings is roughly the identical as Glasgow, says GetAgent, however the preliminary buy worth is nearly double which means an annual yield of 6 per cent earlier than prices.

College students usually stay in a shared home after the primary yr. Landlords can let the property to a number of college students on a yearly contract, with college students anticipated to pay hire all yr spherical – even in the summertime months when time period has completed. Void or vacant durations are prone to be low in areas the place there may be excessive demand from college students. Recognition of such housing is continuous to rise due to UK pupil numbers, now at a report 2.86 million.

Like different buy-to-let landlords, pupil property buyers have needed to adapt to altering market circumstances over the previous few years. Increased rates of interest have elevated mortgage funds, whereas the discount in tax reliefs has additionally dented returns. That stated, for buyers with a low mortgage or no mortgage, earnings from pupil hire can result in a good return in your financial savings.

Duncan Kreeger, founding father of property funding platform TAB, says potential pupil landlords ought to contemplate cities and cities the place there’s a excessive annual pupil consumption. Additionally it is value contemplating areas the place there are excessive numbers of worldwide college students. ‘As an illustration, Chinese language college students usually search high-quality properties with rental yields at a premium,’ he provides.

Landlords who hire out homes may be up in opposition to a rising provide of purpose-built pupil lodging and so might want to guarantee they provide one thing aggressive and that there’s sufficient demand to go round.

College students additionally have a tendency to maneuver after one yr, so landlords will should be ready to search out and set up new tenants yearly or think about the price of utilizing an agent.

Pete Mugleston, managing director at OnlineMortgageAdvisor.co.uk, says Nottingham and Leeds are different cities that would show profitable for pupil property buyers. In Nottingham, which has two outstanding universities, the common property worth stands at simply £196,037. Common month-to-month hire within the metropolis is round £660 however properties close to the town centre can command as a lot as £1,242.

In Leeds, house to 65,000 college students and 5 universities, yields may be 6.5 to 7.05 per cent. Pete recommends Hyde Park, Headingley and Woodhouse as prime places for investing in pupil lodging throughout the metropolis.

‘Lease costs have been steadily rising every year, paralleling the expansion in property values, making it an opportune time to take a position on this space,’ he says.