Purpose Built Student Accommodation was the staple diet and a keen favourite of the hands-off investor for the last few years.
Most major cities and towns with universities have seen considerable investment in purpose built student accommodation over recent years.
Advantages
Low Entry Level
You can invest from around £60,00 so entry level is low whereas many other real estate investments can be more than double that.
No Stamp Duty
The cost of investing in Student Accommodation is below the threshold, there is no Stamp Duty to pay, however, some exceptions do apply.
Higher Returns Offered
Typically the yields offered by many developers for Student Accommodation tends to be higher and the guaranteed period longer than a buy-to-let investment. Most developers offered an 8-10% returns, NET for up to 5 years which is why investors have found this an attractive strategy.
Fully Managed Properties
Another attractive benefit of investing in student accommodation is that the developers appoint a dedicated student accommodation management company to manage the whole site. These management companies take care of the lettings, maintenance of the apartments and communal areas and security, as well as the student rental process.
Strong Demand
Many developers moved into this sector due to the huge shortage in student accommodation in cities across the UK. A lot of students either did not want to go into the halls of residence or there was limited availability meaning that these students had to rely on house-sharing or HMO accommodation where the quality was often poor, with few, if any facilities and sometimes miles from the university.
Quality Accommodation and Facilities
With many of the new developments being in prime locations close to the university and offering a wide range of inclusive facilities including, hi-speed Wi-Fi, gymnasiums, meeting, tv and even cinema rooms it was not hard to see why the students and their parents flocked to rent these units and were happy to pay a premium for the privilege.
The Sterling Woodrow Offering:
Hands-off Investments
Our senior portfolio managers handle everything whilst you receive your return on investment
High Yield Returns
Generate high returns for up
to 5 years.
Capital Appreciation
Student investments have the opportunity for capital appreciation over time.
Disdvantages
No Finance Available
You cannot raise finance on this type of investment so you would be putting 100% cash on any student accommodation purchase.
Low Capital Growth
Although the rental returns can be high you will not see the same year on year capital growth that you would typically find from a residential purchase or buy-to-let for example.
Resale Market
Another important thing to consider is the resale market. When you decide that you want to exit and sell the property on, you will only be able to sell to a cash investor due to the financing issue. This can really cut down your options. There is also a low demand in the secondary market so selling is not always easy and can take some time and even require lowering your price.
Fall in demand
Student accommodation is based on the term times, and of course, the universities being open. The pandemic has meant that student accommodation has stood empty with no rental income although basic running costs and overheads to cover the ongoing maintenance, utilities and security still had to be paid which has reduced profits and returns considerably. Add that to the drop in student numbers after Brexit and the fact that people have less money which means that students are looking for cheaper options.
For more information about Student Property Investment contact Sterling Woodrow.