A student studio or a ‘student pod’ is very different as a property investment compared to the typical buy-to-let properties that almost all property investors know all too well. Purpose-built student accommodation is an investment that many experienced property investors will see as an asset because they view it as low risk and hands-off, which allows them to develop another income stream but without having to invest significant amounts of time in the process.
PBSA then are property investments that generally yield an assured 7 - 9% rental return without the day-to-day responsibilities and tasks of maintaining and letting the properties themselves. Tenancy rates for specialist student accommodation are at around 99% which is higher than almost any other property investment.
When you are dealing with a regular buy-to-let getting and keeping paying tenants can often be an ongoing concern, but because there is a structural under-supply of specialist student accommodation within the UK, PBSAs simply will not suffer with this issue. There is characteristically only about 25% of students in the core university cities within the UK that can be catered for in private specialist student accommodation and university run accommodation compared to students looking for residential houses or HMOs (Houses of Multiple Occupation).
One thing to be aware of is that when you invest in a PBSA you are doing so for residual income – you will make your return on investment on the rental income that is generated by your tenants. Realistically you will not make a lot of money form capital appreciation, however with hands-off yields of up to 9% and 99% tenancy rates, why would you want to sell your investment?
Often when purchasing a purpose-built student accommodation, the investment will be off-plan. This gives you a good discount as the property is still under construction, and the value of the property when built will increase. On top of this, the management of the property will often be included in the purchase price - leaving you with up to a 5 year fully managed investment.
There may be circumstances in which you have to sell some investments in order to free up some cash and if you have bought a fully-managed off-plan student pod then there will likely be a buy-back option attached to the deal.
In terms of exit strategy and selling your investment there is further benefits to this investment; since PBSA is classified as a commercial property, there is no Capital Gains on resale should you enjoy some capital appreciation.
Investing in a student accommodation property will mean that you are investing in a purpose built property. It will additionally come with an increase in demand for these properties which is inevitable following the fast increase in student numbers. All students will want to rent accommodation that they can think of as a place to call home during their course and years of studies, so all the additional mod-cons are expected to be included as standard in these student accommodations.
Because of this newly established standard of student living (which has changed majorly over the past 20 years) the designers and developers of these student accommodations are adding more and more luxuries to the property developments. They are doing this to compete for the attention and business of the ever-growing student demographic. It is a wise decision to invest in a PBSA because the better standard of facilities will always continue to attract tenants year after year, with not a lot needed from you.
Student who are searching for more luxurious accommodations there will be other on site facilities such as security, launderettes, gyms, safe bicycle storage and communal areas. They may even have better technology such as tablet computers to allow occupants to control an assortment of elements in their living space such as repairs and booking communal areas. Each of these useful features will add more attraction to the potential student looking for a second home near their university.
When looking for a good deal on a student accommodation investment you need to think about picking a property that stands out from the rest. To get the most value and profits you should invest in a property that is high quality provides home comforts and an aspect of luxury that many students these days will want to spend their money on.
Property investors realise that unlike buy-to-let properties, a student accommodation will not give them income through capital growth, but instead they will rely on rental income. Some investors who want to grow their portfolio or beginners who are searching for a fairly low risk property investment strategy will benefit from student accommodation investments.
There will always be a demand for student accommodation, as shown in recent UCAS reports. In areas such as Liverpool, the student population is through the roof, which means that there is a big demand every year. You may be wondering if universities have housing on campus, why would there need to be additional accommodation outside of the campus. The truth is, the demand is still there because university dorms can't house all students. The for example, the University of Liverpool accommodation is on campus. However, they can't accommodate everyone that attends the university, so students need to look elsewhere for housing. This is where purpose-built student accommodation comes in, because it is situated in an ideal location near the university and the town centre, making it appealing to student tenants.