Everything you need to know about investing in student accommodation

Student accommodation is in high demand, and high returns and tenancy rates make investment a tempting proposition. Investing in student property can sometimes be a risky business however, so how do you get involved in this lucrative market?

Keep reading to learn a few of the key things we share with all our investors in the Premier Property community to think about before investing in student property.

Here are some quick tips to get you started:

Why invest in student property?

As a growing market with no sign of slowing down, student accommodation is rife with opportunities for smart investors and can make a great addition to any portfolio!

Student properties have high tenancy rates compared to other buy-to-let properties, and it is usually fairly easy to find tenants each year.

With returns often between 9% and 15%, this kind of investment offers higher returns than other forms of buy-to-let property.

Here are some quick tips to get you started:

As a growing market with no sign of slowing down, student accommodation is rife with opportunities for smart investors and can make a great addition to any portfolio!

Student properties have high tenancy rates compared to other buy-to-let properties, and it is usually fairly easy to find tenants each year.

With returns often between 9% and 15%, this kind of investment offers higher returns than other forms of buy-to-let property.

You NEED to be prepared for these!

PBSAs

A PBSA is a Purpose-Built Student Accommodation, often in the form of a pod or ‘cluster’ apartments in halls of residence. Student pods often go on the market off-plan and are usually managed for you. Sounds like an easy, hands-off investment right?

With guaranteed incomes on offer of up to 15% return over the first few years, investing in pods can look like a no-brainer, but remember, if a deal looks too good to be true – it probably is!

Why invest in student property?

​In many cases, you will pay a steep price upfront, which is in fact being used to subsidise that fantastic-sounding guaranteed income. Make sure you know the real market value of the property, when the guaranteed income ends you don’t want to discover you’ve been getting paid with your own money!

Here are few more factors to think about:

  • High degree of development and management risk. Do your research on everybody involved in the deal, you aren’t going to have the same level of control that you would have over other investments.
  • Unpopular with lenders. Student pods don’t really appeal to anyone except students, so lenders can be worried about long-term tenancy rates and resale value.

Investing in clusters of apartments, particularly those within halls of residence, offers more realistic and reliable returns, but they can be hard to get your hands on as they are usually owned by university institutions.

If you spot an opportunity to acquire a property like this, don’t waste any time! But that doesn’t mean you shouldn’t still do all of your due diligence on the property.

Here are few more factors to think about:

·         High degree of development and management risk. Do your research on everybody involved in the deal, you aren’t going to have the same level of control that you would have over other investments.

In many cases, you will pay a steep price upfront, which is in fact being used to subsidise that fantastic-sounding guaranteed income. Once the guaranteed income period ends, many investors find the profits dry up and all that is left is the sinking realisation they have been getting paid with their own money!

Student pods are also exposed to a high degree of development and management risk, so do your research on everybody involved in the deal, and make sure they know what they are doing and have the track record to prove it!

Student pods can be unpopular with money lenders, who also have concerns with the re-sale and long-term tenancy prospects with this type of property, as they don’t have a great deal of appeal outside of the student property market.

Investing in clusters of apartments, particularly those within halls of residence, offers more realistic and reliable returns, but they can be hard to get your hands on as they are usually owned by university institutions. If you spot an opportunity to acquire a property like this, don’t delay!

HMOs

A House in Multiple Occupancy (HMO) means each bedroom in the property is let individually to tenants, which can give you great rental yields.

In some areas councils are trying to cut back on the number of HMO licenses they give out, so it pays to look into this before making an investment!

This is usually done via Article 4 directions, which you can read about here:


There are a lot of changes coming to HMO legislation on October 1st, don’t get caught out! Archie Maddan and I break down the changes for you in this video:


 [vd1]I like this, but is there anyway we can avoid people going off of hour site? Maybe embed the document in someway?

A House in Multiple Occupancy (HMO) means each bedroom in the property is let individually to tenants, which can give you great rental yields.

In some areas councils are trying to cut back on the number of HMO licenses they give out, so it pays to look into this before making an investment!

Retail funds available for HMOs can involve a little risk as these funds are often based offshore and unregulated, so think carefully about how to fund your investment. Ask yourself:

Will I be able to get my money out when I want to?

There are a lot of changes coming to HMO legislation on October 1st, don’t get caught out! Archie Maddan and I break down the changes for you in this video:

In many cases, you will pay a steep price upfront, which is in fact being used to subsidise that fantastic-sounding guaranteed income. Once the guaranteed income period ends, many investors find the profits dry up and all that is left is the sinking realisation they have been getting paid with their own money!

Student pods are also exposed to a high degree of development and management risk, so do your research on everybody involved in the deal, and make sure they know what they are doing and have the track record to prove it!

Student pods can be unpopular with money lenders, who also have concerns with the re-sale and long-term tenancy prospects with this type of property, as they don’t have a great deal of appeal outside of the student property market.

Investing in clusters of apartments, particularly those within halls of residence, offers more realistic and reliable returns, but they can be hard to get your hands on as they are usually owned by university institutions. If you spot an opportunity to acquire a property like this, don’t delay!

HMOs

A House in Multiple Occupancy (HMO) means each bedroom in the property is let individually to tenants, giving you much higher rental yield than a comparable to-let property.

You need a license to make your property an HMO. In some areas councils are trying to cut back on the number of HMO licenses they give out, so it pays to look into this before making an investment!

There are retail funds available for this type of student accommodation; however these can involve a little risk as these funds are often based offshore and unregulated, with high charges and poor liquidity sometimes making it difficult to get your money out when you want to.

Thoroughly research the companies involved and make sure you fully understand what you are getting into, get someone to help you with this if you need to!

If you want to get started investing in HMOs, or you already are, don’t miss the Premier Property Club event covering the major legislation changes coming October 1st. You NEED to be prepared for these!

Choosing a student property

So how do you know if there is demand for student accommodation?

Simple – just look at recent student numbers at the university and then look into what is available. While sites like Right Move and Zoopla are still useful here, you can also learn a lot from:

  • Student accommodation sites like Student.com.
  • Student lettings agents.
  • Student Unions.
  • The University itself.

You always want to take advantage of government funding where it is available. To maximise your funding here look for Universities known for:

  • Science.
  • Technology.
  • Mathematics.
  • Engineering.
  • Overseas students.

Demand for student accommodation in London is massive, so if you are looking for a smaller initial investment you will want to look outside the capital.

As most students do not own a car, arguably the most important factor when choosing a student property is its location. Students will pay a lot more in rent for accommodation within 20 minutes’ walk of the university.

Many students are living away from home for the first time, so the safety of an area is also usually very important to them. When looking at a location, ask yourself:

Would I want my kids living here?

No? You might have a tough time getting tenants in that property.

If you have any students in your family you will know how critical the Internet connection can be for them.

Think about:

  • An inclusive or subsidised Internet package. Having their internet bill included in the rent is one less thing for your tenants to think about, and a good connection is a selling point!
  • Speed. A good rule of thumb is at least 10 Mb/s. DSL Checker is an excellent resource for fact-checking providers’ claims about their connection speeds.
  • Reliability. Simply Googling Internet reliability in your location should tell you enough here. If you find dozens of complaints of outages or poor speed, save yourself the headache as these issues can go on for years.

It is smart to consider the Internet connection even if your tenants will be arranging the package themselves.

If you have any students in your family you will know how critical the Internet connection can be for them.

Think about:

·         An inclusive or subsidised Internet package. Having their internet bill included in the rent is one less thing for your tenants to think about, and a good connection is a selling point!

·         Speed. A good rule of thumb is at least 10 Mb/s. DSL Checker is an excellent resource for fact-checking providers’ claims about their connection speeds.

·         Reliability. Simply Googling Internet reliability in your location should tell you enough here. If you find dozens of complaints of outages or poor speed, save yourself the headache as these issues can go on for years.

It is smart to consider the Internet connection even if your tenants will be arranging the package themselves.

When it comes to the property itself, try to focus the search on properties with large kitchen and lounge areas as these appeal the most to students.

As a general rule, students don’t care about gardens - so don’t invest in one. They can be costly to maintain and won’t add much value.

In many cases, you will pay a steep price upfront, which is in fact being used to subsidise that fantastic-sounding guaranteed income. Once the guaranteed income period ends, many investors find the profits dry up and all that is left is the sinking realisation they have been getting paid with their own money!

Student pods are also exposed to a high degree of development and management risk, so do your research on everybody involved in the deal, and make sure they know what they are doing and have the track record to prove it!

Student pods can be unpopular with money lenders, who also have concerns with the re-sale and long-term tenancy prospects with this type of property, as they don’t have a great deal of appeal outside of the student property market.

Investing in clusters of apartments, particularly those within halls of residence, offers more realistic and reliable returns, but they can be hard to get your hands on as they are usually owned by university institutions. If you spot an opportunity to acquire a property like this, don’t delay!

HMOs

A House in Multiple Occupancy (HMO) means each bedroom in the property is let individually to tenants, giving you much higher rental yield than a comparable to-let property.

You need a license to make your property an HMO. In some areas councils are trying to cut back on the number of HMO licenses they give out, so it pays to look into this before making an investment!

There are retail funds available for this type of student accommodation; however these can involve a little risk as these funds are often based offshore and unregulated, with high charges and poor liquidity sometimes making it difficult to get your money out when you want to.

Thoroughly research the companies involved and make sure you fully understand what you are getting into, get someone to help you with this if you need to!

If you want to get started investing in HMOs, or you already are, don’t miss the Premier Property Club event covering the major legislation changes coming October 1st. You NEED to be prepared for these!

Choosing a student property

Assessing demand for student property could not be easier, simply investigate the number of students attending college or university there and the number of properties available for students to let.

The government currently invests the most funding into accommodation for universities focused on science, technology, mathematics and engineering, as well as universities accepting large numbers of overseas students, so you can save time by focusing on these areas first.

It is worth noting that any property in London will require a significantly higher initial investment than other properties, although high demand means it can be worth the extra cost.

As most students do not own a car, arguably the most important factor when choosing a student property is its location. Students will pay a lot more in rent for accommodation within 20 minutes’ walk of the university.

Many students are living away from home for the first time, so the safety of an area is also usually very important to them. When looking at a location, ask yourself:

Would I want my kids living here?

If the answer is no, you will probably have a tough time getting tenants.

Students need a fast and reliable internet connection and will often ask about this. Offering a good subsidised or inclusive internet package is a major bonus that will make you stand out. Try to avoid locations where internet is poor, a quick Google search for speed and reliability should tell you all you need to know.

When it comes to the property itself, try to focus the search on properties with large kitchen and lounge areas as these appeal the most to students.

As a general rule, students don’t care about gardens - so don’t invest in one. They can be costly to maintain and won’t add much value.

Assessing demand for student property could not be easier, simply investigate the number of students attending college or university there and the number of properties available for students to let.

The government currently invests the most funding into accommodation for universities focused on science, technology, mathematics and engineering, as well as universities accepting large numbers of overseas students, so you can save time by focusing on these areas first.

It is worth noting that any property in London will require a significantly higher initial investment than other properties, although high demand means it can be worth the extra cost.

As most students do not own a car, arguably the most important factor when choosing a student property is its location. Students will pay a lot more in rent for accommodation within 20 minutes’ walk of the university.

Many students are living away from home for the first time, so the safety of an area is also usually very important to them. When looking at a location, ask yourself:

Would I want my kids living here?

 If the answer is no, you will probably have a tough time getting tenants.

Students need a fast and reliable internet connection and will often ask about this. Offering a good subsidised or inclusive internet package is a major bonus that will make you stand out. Try to avoid locations where internet is poor, a quick Google search for speed and reliability should tell you all you need to know.

When it comes to the property itself, try to focus the search on properties with large kitchen and lounge areas as these appeal the most to students.

As a general rule, students don’t care about gardens - so don’t invest in one. They can be costly to maintain and won’t add much value.

Managing a student property

The basics of managing a student property are the same as any other property, but there are a few extra things to think about here.

Make sure the property is clean, well-maintained and has robust furniture and fittings. Students are not known for taking good care of their accommodation!

You will probably be re-decorating on a pretty regular basis so keep it simple and don’t splash out.

On that note, get landlord’s insurance with good cover for damages. Although the parents or guardians of students usually make reliable guarantors, make sure the insurance also covers lost rent.

When it comes to providing kitchen appliances, anything that saves your tenants time is a major selling point. The big three every student looks for are:

  • Microwave.
  • Dishwasher.
  • Washing machine.

You definitely want to provide all three if you have the space.

Student lettings agents are where the most tenants can be found. With a lettings agent you get the assurance of referenced and credit-checked tenants, and it saves you the trouble of finding tenants every year.

Advertise all year round. It used to be that student landlords could take advantage of inflated rent prices during the ‘Christmas rush’, but more and more students are disregarding their University’s advice to find a house before Christmas in search of a better deal.

Looking for more tips on furnishing your property? Have a read of my recent article on adding value to your property investments.

Looking for more tips on furnishing your property? Have a read of my recent article on adding value to your property investments.

The basics of managing a student property are the same as any other property, but there are a few extra things to think about here.

Make sure the property is clean, well-maintained and has robust furniture and fittings. Students are not known for taking good care of their accommodation!

You will probably be re-decorating on a pretty regular basis so keep it simple and don’t splash out.

On that note, get landlord’s insurance with good cover for damages. Although the parents or guardians of students usually make reliable guarantors, make sure the insurance also covers lost rent.

When it comes to providing kitchen appliances, anything that saves your tenants time is a major selling point. The big three every student looks for are:

·         Microwave.

·         Dishwasher.

·         Washing machine.

You definitely want to provide all three if you have the space.

Student lettings agents are where the most tenants can be found. With a lettings agent you get the assurance of referenced and credit-checked tenants, and it saves you the trouble of finding tenants every year.

Advertise all year round. It used to be that student landlords could take advantage of inflated rent prices during the ‘Christmas rush’, but more and more students are disregarding their University’s advice to find a house before Christmas in search of a better deal.

If you want to get started investing in student accommodation, or you already are, don’t miss the Premier Property Club event covering the major legislation changes coming October 1st. You NEED to be prepared for these!

The basics of managing a student property are the same as any other property, but there are a few extra things to think about here.

Make sure the property is clean, well-maintained and has robust furniture and fittings, as students are capable of inflicting significant wear and tear on a property. You will probably be re-decorating on a pretty regular basis so keep it simple and don’t splash out.

On that note, ensure the landlord’s insurance has good cover for damages. Although the parents or guardians of students usually make reliable guarantors, make sure the insurance also covers lost rent.

Time-saving kitchen appliances such as a microwave and dishwasher add a lot of appeal to a student property.

Renting through a lettings agent rather than privately is generally a good idea as you will have the assurance of knowing your tenants have been referenced and credit checked, as well as reducing the amount of hands-on time you have to spend finding new tenants each year.

Students are usually pressured by their universities to find the next year’s accommodation before Christmas, but many savvy students know to avoid the higher prices of the ‘Christmas rush,’ so advertise your property throughout the year.

Outside the Property Market

Although some improvement will be seen on the interest rates of savings accounts, there will not most probably be any major increases, as banks tend to utilise such rate rises to widen their interest margins and profits, and are usually slow to reflect base rate increases in the interest rates of their savings accounts.

The price of the Pound dropped sharply after the hike announcement, however this can be expected to bounce back to its pre-hike position as the anticipated change will have been priced in and accounted for by traders.

Finally, it is important to remember that outside of the property market in London, the base rate increase can be expected to be of minor impact, for a number of reasons. Firstly, the rate increase has been anticipated for some time and the affected markets have largely already taken it into account in advance. Secondly, although this hike is a nearly unprecedented fifty percent rise, 0.25% is a relatively small increase considering the length of the freeze on rate increases and the 6% base rate that was in place before the financial crisis, and the banking sector has been keen to iterate that the increase represents a reflection of the UK’s improving economy rather than an alteration to it. Thirdly, with so much dependent of the still uncertain EU trade deal, many markets, the property market included, are likely to reserve major changes for once a definitive deal has been announced, or at least the lack of a deal has been definitively announced.

Although some improvement will be seen on the interest rates of savings accounts, there will not most probably be any major increases, as banks tend to utilise such rate rises to widen their interest margins and profits, and are usually slow to reflect base rate increases in the interest rates of their savings accounts.

The price of the Pound dropped sharply after the hike announcement, however this can be expected to bounce back to its pre-hike position as the anticipated change will have been priced in and accounted for by traders.

Finally, it is important to remember that outside of the property market in London, the base rate increase can be expected to be of minor impact, for a number of reasons. Firstly, the rate increase has been anticipated for some time and the affected markets have largely already taken it into account in advance. Secondly, although this hike is a nearly unprecedented fifty percent rise, 0.25% is a relatively small increase considering the length of the freeze on rate increases and the 6% base rate that was in place before the financial crisis, and the banking sector has been keen to iterate that the increase represents a reflection of the UK’s improving economy rather than an alteration to it. Thirdly, with so much dependent of the still uncertain EU trade deal, many markets, the property market included, are likely to reserve major changes for once a definitive deal has been announced, or at least the lack of a deal has been definitively announced.

About the Author

Kam Dovedi is a leading UK property expert. Known for testing, taking underperforming strategies and accelerating them, and teaching people how to create their own personal wealth, he has become the 'go to' person for investors and developers that would like to create, grow and accelerate their property investing and developing. Having been a property investor and developer for over 28 years, and having successfully implemented (and still does implement) a range of strategies from: buy to lets, HMOs, Permitted Developments, New Builds and Commercial Conversion means he has built-up a significant Multi Million Pound Property Portfolio. Kam passes his information, knowledge, and experience to his mentees in the Premier Property Inner Circle and people who read resources and attend training by Premier Property Education.

Leave a Reply 2 comments

vishaal dovedi - August 16, 2018 Reply

Great perspective on student property Kam. Thank you!

KIRIT WADHVANA - August 30, 2018 Reply

Thanks for valuable information.

I am interested in this!

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