Developments in certain areas fare better than others when it comes to student accommodation investments.
For example, a house in a leafy suburb probably would not do as well as a city centre apartment or room. Students’ requirements are ever-changing, and whilst several years ago they might have been content in a shared house away from town, now they want to live centrally with easy access to the city’s nightlife and university campuses.
Similarly, purchasing accommodation in a smaller town with a couple thousand students will not generate a massive income. There will not be much demand if there are too few students or if there are indicators in cities, like Bradford, where a large proportion of students tend to live at home (Unipol). To make sure your student accommodation investment stacks up, you will need to consider the number of students, amount of existing accommodation developments (including their location, amenities etc) and how many new developments are in the pipeline. Additionally, you will need to research the scope for attracting new students, such as the university’s rate of growth and expansion plans.
If the property is a new development, you would need to consider its completion date. Students start university in September and will want to move into their accommodation at that time. If the development is not ready by then it is less likely that it will be filled, and you will be looking at several months without any rental income as students are generally on year-long tenancies and will not consider moving midway through that.
There are many different types of student accommodation, from HMOs to student pods and apartments which fall under the category of purpose-built student accommodation.
HMOs were typically popular with students who wanted cheap accommodation and were not concerned about location. Since HMO licensing reforms it has become a less attractive option and purpose-built student accommodation has come to the forefront. Purpose built student accommodation is popular with investors as the management company deals with the upkeep of the building and landlords will face fewer licensing restrictions.
Student property typically has a lower entry rate compared to regular buy to lets. There are some drawbacks with this kind of investment though, as the size of units in purpose-built accommodation blocks and their commercial nature means most lenders will not be prepared to offer mortgages on them. Ensure you have the full amount in cash for the unit you are deciding to purchase, or that you will have the full amount within the timescale specified if the developer offers a flexible payment plan.
Are you looking to achieve high yields or good levels of capital growth? Purpose-built student accommodation is not intended to be an investment that achieves high levels of capital growth. Its attractiveness is underpinned by the demand and the rental yields that can be achieved, alongside its low maintenance nature as a management company will maintain the pod or apartment. You are not likely to get much of an uplift when it comes to reselling the unit.
Those looking to achieve high levels of capital growth should instead consider buy to let investments in towns with a short supply of housing. They should also aim to keep the investment for the long term as prices may fluctuate in the short term due to political upheaval or demographic changes.
One Touch Property has a range of student accommodation investments in some of the most desirable locations. Our property sourcer scrutinises every opportunity we are presented with to ensure the fundamentals stack up. Our investment consultants can provide guidance on which UK property investment will best help you achieve your financial goals.
Image c/o StockMonkeys.com
Interested in investment property news?
Sign up to our newsletter and keep up to date on the latest property news and investment opportunities.