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If you own a student property, which is any home used strictly for the purpose of being rented out to university students, and are thinking about selling it, there are certain tax issues and other steps to consider when selling. Depending on the method that you choose for selling the property, it should be relatively simple to earn a decent profit and find a buyer fast.
- What qualifies as student property for the purposes of selling?
- Potential tax liabilities you might have when selling student property
- Pros and cons for buyers when selling your student property
- Getting your student property ready for selling
- Your options to find a buyer when selling your student property
- Top questions and answers about selling student property
What qualifies as student property for the purposes of selling?
Generally, student properties are those houses, flats or other buildings that are used solely for being rented out to students at nearby colleges or universities to live in during their courses.
Regardless of the degree that someone is pursuing, most courses last on average between three to five or more years. It’s possible that some students might find a place they love and want to rent it the entire duration of their course, which can provide great security for the owner of the accommodation because they know they will receive a regular rent payment.
What’s more common in many places is that students might rent your property for just one year or two, because many universities – including most of those in London – also own a certain amount of property that they rent out to students at discounted rates. These are typically small blocks of flats, including highly sought after homes on campus, within walking distance to class.
But the amount of university-owned housing inventory is relatively small, and that’s why every school year there are millions of students who will be looking to rent a room in a home, or an entire house, that is within walking distance of campus or easy to get to via public transport.
Many student properties are what’s known as houses of multiple occupancy, or HMOs. The UK government first defined these properties in a law enacted in 1985 known as the Housing Act, which established that to an HMO is any house "occupied by persons who do not form a single household."
This definition often applies to student houses, where multiple strangers from around the UK or overseas all rent individual rooms in the same property, and share the common areas.
The government then followed up that 1985 law with the Local Government and Housing Act in 1989, which created a wider definition of what qualifies as an HMO. The definition was expanded to include a building where part of that property would not normally be deemed a house, and that was not first built or later adapted to be used as a single occupation home.
The government’s definition of HMOs has evolved, establishing various new categories of HMOs and the differing requirements that can apply to them. Under the current laws and regulations, your student property will be considered to be an HMO if:
- You have three or more tenants and more than one household living in the property
- The tenants all share the same kitchen, toilet and bathroom
Under these two elements, a household is for a specific family, so almost all student homes with multiple rooms should easily qualify as what the government says is an HMO.
If you have any doubt about the exact definition of your student property, you can always consult with a solicitor or other legal advisor who should be able to clarify the situation.
If you’re the owner a house currently rented out to students, you can also follow HMO UK, which describes itself as "the go-to magazine for HMO landlords, investors and developers" – this publication tracks the latest news on buying and selling HMOs, and it can be very useful to read during the time that you’re trying to find a buyer for your property.
Potential tax liabilities you might have when selling student property
Because student properties are usually deemed to be investments by whoever owns them, you will likely be liable for paying some tax should you make a profit on the sale of you property.
In particular, you may be liable for paying the UK government what’s known as Capital Gains Tax on a certain amount of that profit. This tax applies to an asset, like a student HMO, which has increased in value since you’ve owned it. The tax doesn’t apply to private residences typically, and it also won’t apply in the event that you breakeven or make a loss on the sale.
But in the event that you profit from the sale of your student property, the unfortunate news is that the government has removed some Capital Gains Tax relief that once applied to buy-to-let properties. Instead, if you make a profit when selling your student property, the standard rate of Capital Gains Tax is likely to apply.
Note also that you will likely currently be liable for paying tax on some of the rental income that you earn from your student tenants, depending on how much you make in a year. Speak with a tax specialist like an accountant to fully understand the tax liability with your rental student property. LDN Properties have also released a comprehensive guide about selling a rental property which we suggest you read through.
Knowing this information can be invaluable when trying to sell the home, because potential buyers are likely to ask you about the existing taxes that are charged on the property. Having answers to their questions available immediately might help to speed up the process, rather than keeping someone waiting until you are able to find out the information that they want.
Pros and cons for buyers when selling your student property
When you’re selling a student property, your primary group of potential buyers will likely be investors, because they’ll be looking to continue renting the home out and earning the money from student tenants.
But you might also attract interest from developers who would like to convert a student HMO into a single family house and then try to resell it at a profit, or even in some circumstances from a family hoping to own the property as their own. This is far more likely with houses, where buyers for a flat or block of flats will almost exclusively be investors or developers.
As you may well have experienced during the time that you have owned your student property, there can be a number of benefits and drawbacks. It’s worth understanding the full range of pros and cons of being a student property owner, because this might help you to address any concerns that potential buyers might have, which could in turn make a sale more likely.
Some of the advantages of owning a student property can include:
- Reliable source of rental income, particularly when universities are in session
- Having many student homes can create a strong cumulative profit
- Homes typically require minimal day-to-day involvement by the owner
- Payment for the full year can often be made upfront by students, reducing your risk
- Students may make less frequent demands for upkeep and maintenance
Whilst a few of the disadvantages of being a student home owner are:
- Can be a risky investment if a student lacks the funds to pay their rent
- Just one bad tenant can cause major, expensive damage to your property
- Even decent tenants may not take very good care of the home
- As long as the home remains vacant, it will be costing you money
- Students only rent for a year or two, then you’ll have to find new tenants
Be honest with prospective buyers about the pros and cons from the above list that you have experienced during the time that you’ve owned the property. And be prepared to answer any questions or concerns that they might have about any of the factors outlined above. Buyers will be far more likely to make an offer to a seller that they think is honest and transparent.
Getting your student property ready for selling
If you’ve decided the time is right to find a buyer for your student property, there are certain steps that you should consider taking in order to get the home ready for sale. These include making the property look its best for buyers, and collecting all necessary documentation.
Make the home presentable
First appearances matter in many aspects of life, including selling properties – and that’s why you should strive to get your student property looking in its best condition when trying to find a buyer. Some simple cleaning and rearranging can add a surprisingly large amount of value for prospective buyers.
It’s possible that your student tenants might have left the house in less-than-perfect condition when they moved out, so it’s recommended that you give the place a comprehensive clean. Simply tidying the house, repairing small-scale damage – like missing roof tiles, torn wallpaper or carpets and broken glass – can help to increase what buyers are willing to pay for it, particularly when compared to a home that’s in poor condition.
More expensive and time-consuming work to make the student property presentable for sale can include a complete renovation of a heavily used shared room like the kitchen or bathroom. If the fixtures or fittings are very dated, investing funds and effort into replacing everything with modern appliances and décor can help to enhance the overall value of the house or flat. Of course, this is only a viable option for those people with the time and resources to do this work.
Only pursue those improvements to your student property that you can afford, and that can be done within your preferred timeline for selling. Never invest in work that would run the risk of selling at a loss, and instead focus on trying to find a buyer quickly whilst making a good profit. You can often still sell fast without having to completely renovate the property.
Document check
Another important step that you should take ahead of seeking a buyer for your student property is to make sure you have copies of all the documents that you might need for the sale.
For HMOs in particular, there can be a long list of certifications and other paperwork that many buyers will want to see before making an offer. Having all of these documents handy at the start of the process can help to speed up the process, because the alternative is waiting for a potential buyer to request a document and then having to wait whilst you try and locate it.
Here’s some of the paperwork a buyer might want to see for a student HMO:
- Rental schedule for the property
- HMO license certification
- Fire alarm certification
- RICS valuation, if available
- Electrical safety certification
- Management contract for the HMO
- Building regulation certification
- HMO planning documents
Your options to find a buyer when selling your student property
Choosing to sell your student property is a major decision, and one of the final steps to take is deciding the method that you’ll use to try finding a buyer for the house, flat or other building.
Generally, your choices come down to selling through an estate agent, selling through an auction, selling to a fast home buyer, or attempting to find a buyer on your own. There are some advantages that are specific to each approach, and several methods also have rather serious drawbacks, depending on how quickly you want to sell, and how much profit you want to make.
You should think about preparing a budget for the sale of the student property that outlines all of the important facts and figures, including your desired timeline for finding a buyer, whether you are willing to pay any commission when selling, the amount of net profit that you want or need to make, and more, and then compare that against the four choices detailed below. That’s the best way you’ll have to find out the approach to selling that is the ideal match for your situation.
Selling through an estate agent
Perhaps one of the most traditional ways of selling a property, estate agents take care of most of the work. They will craft a listing that describes the student property and includes photographs of the inside and outside, advertise this listing online, in their office and in local newspapers, organise viewings for potential buyers to tour the property, and hopefully field any serious offers and see them through to completion – a lot of work that can take a long time.
It’s not unheard of for some properties sold this way to remain on the market without getting a serious offer for many months, or even more than an entire year. Naturally, this is far from perfect for those owners who would like the speediest timeline for selling their properties.
You can also expect to pay fees to an estate agent if they’re able to sell your student home. This commission is subtracted from the sale proceeds immediately, which reduces the amount of net profit that you can expect to make.
One problem you might face is that many estate agents may only be used to selling private houses and flats, and they might see a student property as a specialist sale with which they have no experience. If this is the situation, they might struggle with knowing how to best market the property and attract buyers, which can delay the sale process even longer. Ask individual estate agents to tell you their track record of success with selling student properties.
Selling through an auction
Auctioning your student property is considered a gamble, because there’s no certainty about what the final sale price might be, or if the house or flat will even attract any offers.
When you sell this way, the auctioneer will prepare and advertise a listing to generate interest from potential buyers. With the traditional method of auction, the listing will be live for several weeks or longer, and the auction will take place on a set day and time, with people placing bids of ever-increasing value. With the modern method of auction, people will be able to place bids 24 hours a day, seven days a week, as soon as the listing is live and until it expires. Whoever has placed the highest price bid at the time of that deadline is deemed the auction winner.
You might be asked by an auctioneer to choose between the traditional or method methods, or they may only offer one approach, so it’s useful to know the two different choices work. Either way, you can expect to process to take several months from beginning through to completion.
Like estate agents, auctioneers will also charge you commission. This fee will be deducted from the sale proceeds before you receive any, which means you should plan on making less net profit. Ask if it’s possible for the auctioneer to let you pass some costs on to the winning high bidder to pay.
An important tip when selling this way is to choose a strong reserve price, which is the lowest value at which you’re prepared to sell your student property. You need to find a value that will attract buyers whilst also ensuring a profit for you, even after the auctioneer’s fees are paid. Your top priority needs to be preventing a sale where you breakeven or make a loss.
Also, some auctioneers might not have much experience with selling student properties, so you should ask individual companies about their past successes in finding buyers for this type of home. If they haven’t managed to sell many student properties at a profit in the past, it’s a clear signal that they could find it difficult to generate enough interest to get a good price for yours.
Selling to a fast home buyer
Fast home buyers are those companies like London-based LDN Properties that have the financial resources available to immediately buy all types of homes, including student properties. They don’t have to wait for many weeks or months to first get approval for a mortgage to complete the purchase, and this reduces the timeline for selling significantly.
Typically, most quick home buyers could complete the purchase of a student property within just a few short weeks, and that includes exchanging contracts and paying you the proceeds. That’s why these companies are often seen as the speediest way to sell any type of property.
The list of properties that they can buy is also very long – LDN Properties, for example, has made many varied purchases since launching in 2003 that include student properties, as well as vandalised flats, homes built close to power lines, properties with widespread dry rot, flats with cladding, houses with high levels of radon, properties with storm damage, plots of land, lock-up garages, and other examples. LDN Properties can also consider purchasing specialist property types such as if you are selling a wind turbine.
A further benefit of selling your student property to a quick buyer is that they will never charge you any fees, which means that you can keep the full proceeds, which maximises your profit. As a result, they’re a great choice for owners who are looking to sell profitably and swiftly, rather than estate agents or auctioneers who will charge fees that will reduce your net sale profit.
If you have any uncertainty about whether or not you can trust a quick buyer when selling your student property, there’s even an independent organisation known as The Property Ombudsman (TPO) that oversees the industry for your additional protection. TPO writes policies, which all members must follow, that aim to guard owners against fraud in the quick buying sector, giving you extra peace of mind when selling your student property to a fast buyer.
And it’s incredibly fast, easy and free to check whether a fast buyer is registered with TPO. Just visit the organisation’s website and click on the tab marked “Find a Member” on the left side of the main page, and type in the name of a company. If they’re genuinely a TPO member, like LDN Properties, you’ll be able to see their membership details. But if they’re not registered, you won’t get any results – and you should be very wary about selling your student property to a company that can’t prove it belongs to TPO, or refuses to join, because it could be a scam.
Trying to find a buyer on your own
Selling on your own means that you will be responsible for absolutely every step, from the initial creation and advertising of a listing, through to organising and hosting viewings, and taking any offers from buyers. It can be an overwhelming amount of work and it’s not something you’ll be able to do in your spare time, so it’s not advised for the vast majority of people.
The only time when this could be a good choice is if you have a family member or friend who is an expert at selling student properties and is willing to help you with the sale for free. Otherwise, because of all the work involved, you might be waiting a full year or longer before selling.
Otherwise, you will be creating a lot of stress for yourself with the only real benefit of not having to pay a third party any commission for finding a buyer. But you can achieve this exact same outcome, and with zero hassle, if you sell your student property to a fast property buyer. They will purchase the property quickly, and the legitimate companies won’t charge any fees.
Top queries and answers about selling a student property
Property owners thinking of selling their investment property quickly often have a few questions for us, ranging from if it is possible to sell whilst tenanted through to selling a property in poor condition. Here are some of the top questions we’re asked about selling student property:
Your top questions when selling student property
Typically, student properties are houses, flats or other buildings in which several students attending nearby universities or colleges are living during their studies – they won’t be from the same family, but they will share the common areas and facilities like the kitchen and bathroom. The most common type of student property is a house of multiple occupancy, or HMO.
Most likely yes, if you sell the home at a profit, because you are only exempt from Capital Gains Tax when selling property if the building is your primary residence. Note that the tax will only be charged on the gain, or increase above the original price you paid for the home, that you have made on the student property since you bought it, and not the larger final sale price. Be sure to consult with a tax professional.
Yes, there’s a long list of documents that a buyer might want to see when considering making an offer on your student property, and having them handy upfront can save a lot of time. This paperwork can include, but is not limited to, the property’s fire alarm certification, HMO planning documents, the rental schedule for the property, the HMO’s management contract, and more.
This depends on the method that you choose for finding a buyer, because some won’t charge any fees. Estate agents and auctioneers will make you pay commission, and this will reduce your net profit because their fees are deducted immediately from the sale proceeds.
Yes, you could consider cleaning the interior and exterior, removing any unnecessary clutter from rooms, and repairing any small problems like a missing roof tile or broken window. If you have the time and money available, you might also consider a larger renovation such as installing a new kitchen, although such work isn’t necessary to sell at a decent price.
It depends entirely on how you try to find a buyer, because when you use an estate agent or try to find a buyer on your own it might take more than an entire year. Auctions typically take at least several months from beginning to end. The speediest option is usually selling to a fast buyer, as they can complete the purchase of your property within just a handful of weeks.
Ask whether specific fast home buyers are registered with The Property Ombudsman (TPO), which is an independent organisation that publishes rules to guard owners against fraud in the fast property buying sector.
