How to Compare Student Property Investment Opportunities?
The student property investment market continues to out perform other commercial property investments in the U.K. The student numbers have continued to increase year on year with an additional 19,209 in 2013 according to UCAS application figures. The United Kingdom continues to attract students from overseas because, when compared with other European countries, it has the highest number of Universities within the top 400 ranked globally.
The market place has attracted a number of institutional investors; the Moorfield Group developed a mixed use student housing in Exeter, called The Printworks, which is comprised of studio and multi-bedroom / cluster apartments, and extensive communal facilities which have been completed and fully tenanted for 2013/2014 student year.
The Knightsbridge Student Housing Fund developed, Astor House, a 519-bedroom development of clusters and studios in Plymouth, which rent from £152 per week.
Although, the student property funds are active in the market, every day investors also can take part in this lucrative investment market.
One Touch Property Investment, who recently won “Best Student Housing Broker of the Year” (Nov 2013) at the prestigious Overseas Property Professionals awards ceremony, have helped hundreds of investors to purchase student accommodation investments.
Investment Director, Arran Kerkvliet said; “A lot of people prefer purchasing actual bricks and mortal rather than investing in a student property fund. It just makes more sense to them because they can own a studio or en-suite room (Pod) similar to the ones their sons and daughters would have stayed in at university.”
“Most of the investments are off-plan, whereby the purchaser contributes a certain portion towards the build cost -typically £27,000- during the construction phase and what they get in return is a fully managed, high yielding investment property”
A good method to evaluate any investment opportunity is to compare and contrast it with other options currently available in the same sector. Some of the most common considerations when investing in student property investment are:
• Supply and demand
• Return on investment
• Rental Guarantee Period
• Credibility of the developer
• Ongoing Management Company
Supply and demand
Often the demand for student accommodation is related to the number of student’s attending the universities, which is often a function of the University ranking. Universities, such as Loughborough, rank in the top 15 for academics and recently won Sports University of the year for 2013. Students are drawn to the successful track record and rich sport heritage, some former student include Sir Clive Woodward, Lord Sebastian Coe and Paula Radcliffe. Loughborough Student pods can be purchased from as little as £39,150 with 8% Net Income for 3 years.
The price of student property investment in Middlesborough is comparable at – £35,995 – and you get more for your money. At that price you can purchase a twenty-four square meter premium studio with 9.5% returns secured over two years. So even though Teeside University ranks 97 in the complete university guide, there is still good demand with 28,000 students looking for accommodation and the university only provides 1
The other balancing factor is the supply side; the easiest way to access the relative supply versus demand is by reading student property guides prepared by commercial real estate consultancies as well as keeping abreast of local law changes -such as the Article 4 Direction- which has been adopted in places like Nottingham, Newcastle and Leicester. The Article 4 ruling restricts the conversion of single-family homes into student residences, thereby limiting supply.
Return on Investment
The bulk of the student property investment is purchased off-plan – up to a year to completion. Some of the developers offer interest paid on deposit… however, for the majority offer no return on investment during the construction process.
Completed student properties, like Loughborough student pods, offer immediate returns of 8% – which is attractive to some investors. Others prefer to go ahead with investments with longer guarantee periods.
There is a Leeds Student Accommodation Investment which comes with a five-year rental guarantee of between 8.1% – 8.3%. Compared with the typical bank savings rate of 2%, that is certainly very attractive to investors, who are prepared to wait for the January 2015 completion.
The Credibility of the Developer & Management Company
It is vitally important know who are working with, the outcomes could end up disastrous.
The company -Trivelles International – sold an off-plan development called, both River House/Imperial Suites, to investors in September 2012 but no development appears to have taken place. Apparently, some investors have already exchanged contracts on the purchase of studios to be rented students and the site does not even having planning permission. See Salford planning portal (Application number 13/63801/FUL). In that sort of situation, investors would be out of pocket by as much as 50% of the purchase price (their deposit) with no returns on investment or protection – that would be very bad indeed.
Prudent investors can avoid the grief by using an award winning student property broker, like One Touch Property Investment, who will help to avoid damaging situations through the process of conducting background research on the developer; thereby helping to select trustworthy partners and reputable management companies to work with.
“We have helped over 200 investors acquire student property in the best locations by seeking out reliable partners to ensure that they can take their purchase decision with confidence and ease” says Arran Kerkvliet of One Touch.
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