Student Accommodation Investment Opportunities

Why Make an Investment in Student Property?

Before starting on the student property investment guide below, if you would prefer to view the widest range of well researched, quality student investment property for sale by any specialist student housing investment agent then please go to our property deals page.

There are two main types for investing in student accommodation. Buying a property and letting it to students in the traditional fashion or investing in purpose built student accommodation, which consists of rooms or studios in a managed block. Since 2010 investment student accommodation has increased in percentage terms more than any other property sector.

Changes in the Landscape of Investing in Student Housing

Why has student buy to let investment in the UK been on the increase?

1. Buying student property offers stronger yields than residential property. It is no coincidence that larger institutions have been and still are more active in buying student accommodation investment than in standard residential property. If you have had the unfortunate experience as a parent of how much property your child gets for your money renting as a student you will understand why. Rents per square foot are extremely high.

2. In a volatile economy, with solid returns more challenging to come by, student property is considered by many institutional investors as a solid investment with strong returns.

3. There has been a major change to the landscape of student housing investment opportunities over the last couple of years because most local authorities in major university towns and cities have begun enforcing article 4 planning restrictions. This prevents the conversion of residential properties to student accommodation. It has led to an increase in purpose built blocks by student accommodation developers, predominantly constructed by institutions. These institutional investors can see that continued growth in student numbers despite the introduction of tuition fees, plus the complete removal of competition from private landlords converting new student accommodation in key areas is putting pressure on the supply. This in turn increases occupancy rates and pushes up rents for students.

With the increase in institutional student accommodation investment, has come an increase in purpose built student accommodation which can be purchased by individual investors. This is the opportunity to buy en suite rooms and studios in purpose built student blocks.
Some purpose built developments are now being sold which offer a gym, 24 hour security, pool room and lounge areas. These high quality developments are being tailored to the high end of the UK student market and the rapidly increasing numbers of wealthy overseas students whose parents may be less than enthusiastic about them sharing in a stereotypical student house.

They are usually packaged offering assured returns. The demand has been high with every development we have been involved in selling out off plan. There have been a couple of developers who got it wrong in the early days so it is important to buy through companies with a good track record. The industry is still very small. At the time of writing, to the best of our knowledge, there are only around 15 developments on the market selling individual en suite rooms and studios in the UK. Some developments are being marketed without planning and others by developers with no track record of managing this type of investment. Broadgate only market developments with planning from developers with a solid track record. A purpose built student accommodation investment is unlikely to qualify for mortgage finance. It will be below most lenders minimum size requirement for a studio apartment. Lenders do not lend on en suite rooms unless you purchase an entire building, in which case commercial finance is available.

plymouth student

Things to Look Out For When Buying a Purpose Built UK Student Accommodation Investment

We carry out due diligence on every project we release for sale. These are the main checks you should carry out.
  1. Has planning been granted? – You would be surprised at the amount of student accommodation for sale that is marketed without planning.
  2. Are the yields sustainable? – Carry out due diligence into the rents achievable. This ensures that strong yields are achievable beyond the assured rental period. If student rents continue to rise at around 3% per annum your yield should increase at the end of the assured rental period. Not only is this important for the income from your student accommodation investment but also to ensure it is easy to resell.
  3. Does the management company have a track record? – Ensure the managing agent has a good track record of operating other student accommodation.
  4. Are your funds secure? – Most student property for sale is being sold quickly off plan. Most developments require you to pay a £5000 reservation fee (which in our opinion is excessive but it has become standard in the industry). They will then typically require 25%-50% on exchange of contracts. There may be another stage payment to make between exchange and completion. It is important to ensure that these funds are not passed to the student property developers and only passed on from the solicitors when an appointed surveyor for the project signs off each stage. Some purpose built student property investments will offer insurance on invested funds. Some will pay interest on those invested funds.
  5. What if the property developer goes bust? – Check that you as a buyer you have a share in the ownership of the project so that you can get together to find someone to complete the project if that happens. Most developers of student accommodation fund the build with the deposits so it would take some severe incompetence for them to go bust during construction.
  6. Do you get a share of the surplus? – On some developments if the operator makes a greater profit than the assured amount it is passed on to you, on others they keep it.
  7. Are there any deductions from the assured rent?
  8. What happens if the student accommodation development isn’t completed in time? If it isn’t ready in time you could be missing out on income.
  9. Are you free to sell at any time?
  10. Are you responsible for the internal maintenance of the room you buy?

Is There an Exit Strategy For a Purpose Built Student Property Investment?

It goes without saying that more people in the UK are looking to buy residential property than buy to let student accommodation. However almost every purpose built student accommodation block we have sold has sold out quickly off plan at full list price. Some developments have sold over 150 properties in one month. If the properties are selling out off plan, with a payment structure that isn’t for everyone and you have to wait nearly a year for the income, they should be easy to sell when they are up and running. We have already sold a number of student pod investments second hand.

“I challenged Broadgate, with whom I had built up trust and rapore, to sell a number of student pods I had purchased off plan through another agent. Broadgate successfully marketed and closed these post-occupation sales, demonstrating a genuine 3rd party exit route that Broadgate can tap” NB – Peterborough

Student House Investment

High gross returns are achievable by purchasing a house and letting to students, however you need to look long and hard at the overheads to work out your net return. The days of supplying some furniture and a roof over a student’s head are pretty much over. Students expect broadband at the very least and will also be unsatisfied with four TV channels so you need to factor the cost of these things in. The better the accommodation you provide the higher the rent you can charge and more likely your property will be let every year. There are many landlords out there who are struggling to let tired and secondary location properties because of the increase in provision of quality purpose built accommodation. It is imperative now more than ever that you buy in a good location and provide quality accommodation.

Another thing to be aware of is the cost and management of utilities. There are good products out there used by student accommodation landlords which make the management of bills simple whether they are included or charged on top of the rent. If you buy a student pod or studio in a purpose built student development the bills will be taken included in the service charge. In some the overall charge for the running of the building will also include the upkeep of the interior of your student pod or studio you have purchased. the following overheads must be considered.

1. Utilities – Consider whether to include them or let the students pay separately.
2. Broadband
3. TV licenses – One per room if you let it on separate tenancy agreements.
4. Managing agent fees – Agents willing to take on student tenancies which are perceived to be higher maintenance than standard lets is not always easy. Choose a managing agent with experience of student lettings.
5. Mortgages – Mortgage rates will usually be higher than on a standard residential buy to let. A valuation on a commercial mortgage for an HMO is likely to be a combination of bricks and mortar value and value based on yield.

Article 4 – Check whether this is being enforced in your local area as they can prevent you converting property to a house of multiple occupation (HMO). If they are, you will either have to buy an existing HMO or buy in an area where it isn’t being enforced.

Although good student accommodation HMO’s are not often sold due to the high returns for investors, the increased regulation in this area, combined with an increasing desire from students to live in quality accommodation has led to an increase in substandard HMO’s coming to the market for sale. Lazy landlords who don’t have the inclination to provide satisfactory student accommodation get pushed out of the market either through regulation or because there is simply better accommodation to be had elsewhere. As any parent of a university age student will tell you, renting Student accommodation varies wildly in price. Some students are price sensitive but there is a growing market for high quality student accommodation which is being driven by the increase in student numbers from overseas, there is also increasing demand from UK students too who have higher expectations than they once did. This gives you the opportunity to improve the returns achievable on an existing HMO. Always make sure you calculate how much renovation will cost you and how much extra in rent you expect to achieve to check the renovations are a sound investment. It is important to buy somewhere in a good location but make sure you’re not paying over the odds.

Student Accommodation Funds – Indirect Student Accommodation Investment.

You can buy shares in a student accommodation fund. These funds will typically build or purchase large blocks of purpose built student accommodation. We are not financial advisors and suggest that you speak to your financial advisor if you would like to look at this option.

We also sell whole blocks of student accommodation for investment all over the UK. Many of these are off market and if you are an investor or fund interested in off market block sales then please contact us.

For more information about investing in student accommodation, contact our team today!

Recent Student Housing for Sale

Huddersfield – Studios from £49,000, Ideal location adjacent to university buildings in a riverside location. Assured 7% net return for 5 years. Shortage of studio student accommodation close to campus.

Sheffield – En suite rooms from £54,950, assured net return of 10% for 3 years, in house gym. High end student accommodation. 5 minute walk to the university

Canterbury – Home to both Canterbury Christ Church University and the University of Kent Canterbury was recently highlighted in a recent report as really struggling to provide sufficient student accommodation. En-suite rooms for sale from £59,995 with a guaranteed 9% net return for investors for 5 years. – Sold Out

Liverpool – A short walk to the University of Liverpool and Liverpool John Moores is The Paramount student accommodation investment. Liverpool is home to over 70,000 students. En suite rooms from £54,995 with 9% net return guaranteed for 5 years. We also have another student development called The Edge down the road from The Paramount offering a 6% net return on your deposited funds from exchange for 2 years followed by a 5 year guarantee at 8%, therefore offering a 7 year return. The video below is for The Paramount.

Plymouth – 9% assured net return for 2 years. Grade II listed prison refurbishment!! High propertion of students living in the private rented sector.

Exeter – In a fantastic location in the city centre and close to the University of Exeter High specification studio apartments from £80,289. Guaranteed net yield of 7% for 5 years. – Sold Out

Newcastle – Invest from £35,750 with finance. Prices from £55,000. Close to Northumbria University and around a mile to Newcastle University Exclusive deals available for Broadgate clients. 7% guaranteed returns with any surplus revenue paid to investors and 9%+ realistic. 35% finance available increasing returns on cash invested to 11-13%. Insurance on deposited funds.

Newcastle student development
Southampton student accommodation coming soon.

We also have off market student houses and blocks of purpose built student accommodation for investment.

Please contact us for more information.