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.