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The risks of renting to students

Tuesday, 15th June 2010

Categories: Lettings Property Management

Author: Peter Barry

Renting to students can be highly profitable although there are risks.  In reality they are often no greater than renting to any stranger.

When students attend university it is often their first taste of independence in another town, city or even country than where they grew up.  They are unlikely to be able to afford (or want) to purchase property and will therefore seek out rental properties, usually close to the university campus or with easy access to transport networks, nightspots and shopping centres.  With a steady supply of students coming to universities every year, rental markets in these areas should flourish.

Students are not quite as fussy as image conscious professionals, and are more prepared to put up with outdated kitchens, colourful bathroom suites and older carpets.  Flats, townhouses and large family homes are all suitable types of accommodation for students with hassle-free, fully furnished, properties the most popular choice.

What are the risks?

The main concern for landlords renting to students is the reputation of the student stereotype for inflicting damage and increased wear and tear from wild parties!

What is the solution?  

Requesting a larger deposit prior to occupation and having an industry standard inventory and check-in report, signed by all parties at the start of the tenancy is one pre-caution. But on the whole, student tenants are significantly better behaved than their reputation suggests.

With regular property visits throughout the term (with reasonable notice of such visits given to the tenants), Landlords or their managing agents can check the condition of the property and if any maintenance issues or damage is noted, repairs can be arranged before the issue escalates.

Another key concern is who has financial responsibility? When there are several students all occupying one property, who signs the lease and who is responsible for any breaches of the tenancy agreement?  All occupants over the age of 18 should be listed on the tenancy agreement and all names on the tenancy agreement will be held jointly and severally liable.  Students generally can’t provide credit references, however parents will often act as guarantors and accept legal and financial responsibility.

With the correct precautionary measures such as careful screening, holding parents as guarantors, or insisting rent is paid up front, you are less likely to find yourself in a rent arrears situation.  However, insisting on rent being paid up front is likely to raise suspicions with prospective tenants, and rightfully so.  It can also affect your rapport with the tenants, who are, after all, your customers.

Of course, even if the rent is paid regularly there is the possibility that the students will fail to pay for utility services ultimately resulting in disconnection (and costly reconnection expenses for the landlord).  This would be where a larger deposit comes in useful!

If landlords are thinking of accepting students, it is wise to employ a professional property management company to check the rent is being paid correctly and expedite arrears when it is not, to carry out property visits and resolve issues at the property if they arise.

Property managers can often act as a professional mediator when things go wrong, removing a lot of potential stress, time and confusion, especially as tenants often find it easier and less intimidating to discuss matters with property managers.  By having an unemotional “third party”, a better level of communication can be achieved between all parties.