A purpose-built student accommodation is a great way to earn income from your savings. It can be a stable property investment compared to the traditional residential buy-to-lets that can be greatly affected by property market dips.
Houses in multiple occupation (HMO’s) are also becoming a thing of the past for innovative investors. The extensive renovations and time involved in costly HMO conversions has proved to be an out-of-date way of investing in a student property. Today, students are looking for more luxurious housing where they can feel at home.
Therefore, a purpose-built student accommodation unit makes such a great investment for the current trends. The construction is also managed by a developer and the maintenance of the building is done by a professional property management company, making it a hands-free investment.
Here are some benefits of investing in a student property.
Universities can’t keep up – University dorms were the most popular option for students, but due to the increased number of UK university acceptances, universities just can’t keep up with housing thousands of students in the campus, so students are forced to look elsewhere – PBSA.
The demand will always be there – Despite the economic climate of the UK or the uncertainty of Brexit, people aren’t going to stop going to school. The demand will always be there for student property as long as there are students. In fact, UCAS and JLL are recording more overseas students coming to live and study in the UK. The cap on the limit of acceptances for each university was also lifted, so more people are attending universities.
Strongest performing asset class – During the times of recession many asset classes preform badly, however student accommodation experiences a demand every year without fail. For good locations that are close to universities, investors can expect a yield of around 8% to 10%, and it is highly unlikely that the NET yields will go lower than this. The income stream is more predictable, making it a stable investment, exempt from stamp duty taxes.
Students can be long-term tenants – If you are able to keep the student tenant happy, they can stay in your unit for the entire duration of their course. It will depend how long a tenant can potentially stay in your unit – medical students spend 6 years in further education. Potentially, you can have a medium to long-term tenant providing you with a stable source of rental income.
No additional management fees – Because a purpose-built student accommodation is considered commercial property, there are no additional fees involved as far as taxes and letting agents. The professional management company chosen by the developer will be responsible for the student tenant sourcing, maintenance, repairs and rent collecting. You won’t have any costs taken from your 8%-10% NET yield. If a student damages property, the management company will cover the costs from their own pocket.
Property investors can benefit from PBSA in many ways. It can be a high yielding investment with low risk and high returns if you have done your due diligence in choosing a location and property. With the help of a property investment consultant, you can find the most profitable student accommodation investment to diversify your portfolio and earn an assured income.