Paragon Bank, the specialist lender, has published figures showing the advantages of smaller university towns or cities for student buy-to-let landlords. These are areas with more HMOs and fewer purpose built student accommodation blocks.
The top location for rental yield was Swansea, with an average rental income of £22,140. This generated a return of 9.56% using the average purchase price of £231,534. Hull was second with an average return of 8.68%, and Plymouth third with 8.41%.
From the top ten locations for returns on student lettings, seven have just one main university. These type of locations have a smaller student population, typically below 25,000.
Richard Rowntree, Paragon Bank’s managing director for mortgages, said: “When it comes to student property investment, heading to the major cities doesn’t always generate the best returns, as these figures demonstrate.
“Smaller towns and cities will typically have a lower proportion of purpose built student accommodation, which has become more commonplace in major cities, whilst major cities also offer a wider array of property that students can rent, such as city centre apartments or build-to-rent schemes.
He added: “Smaller locations will often offer more traditional type student accommodation, such as houses in multiple occupation, whilst property values are generally cheaper in these locations, which can help generate better returns.”
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Paragon recently boosted its limited-edition range of buy-to-let mortgages. The lender relaunched the range of loans for HMOs and multi-unit blocks, which is designed for experienced landlords who either have properties in their own name or through a limited company.