23rd October 2017:
It’s the UK’s strongest asset class, but are all student accommodation properties good investments This is the comprehensive list of what to watch out for when buying student property.
Does it only have 1 year’s rental guarantee?
If so, it is likely the developer has just built your alleged ‘return’ into the sales price. Apartments that are sure to generate strong rental returns will have at least 2 years rental assurances, because the developer can be certain the properties will rent out. Anything that offers less than 2 years rental assurance will have a developer who is not confident the property will rent out and therefore is not willing to take the risk of assuring the returns.
Why is it so cheap?
If it’s cheap it’s for a reason. Cheaper student properties have significantly lower specifications, are much smaller and don’t have access to good facilities. These factors will ensure they receive minimal rental demand. More expensive units can be more than double the size, have access to great facilities and are finished to an extremely high specification. These properties will rent out easily and
require less maintenance, so before you make a hasty mistake and go for the cheapest thing you can find, evaluate the value for money and return on investment.
Is it a self-contained student apartment?
If not, what is your exit strategy? Do you expect any capital appreciation at all? Student pods (non-self contained apartments) are not considered to be individual properties and therefore cannot be bought using a mortgage. Buying a standard student room will significantly narrow your unit’s
potential re-sale market later down the line. However if you buy a fully self-contained student apartment, a bank will lend money to allow people to buy your property once the mortgage market opens back up. This considerably increases your options to a wider re-sale market should you decide to realise your investment in the future.
Are you swimming with the masses OR are you targeting a growing market?
Although students carry a certain stereotype, there are a number of different segments within the UK’s student property market. Does your student property investment target a segment that’s on the rise, or like the majority, focus on the stagnant domestic market? Foreign student numbers in the UK are growing faster than ever before and are forecast to expand significantly over the next decade. With higher budgets available, overseas students will only live in the highest standard accommodation. While many agents sell what they call ‘boutique’ property, the reality is the
majority of rooms are extremely small, have poor facilities and low grade finishes. With very little high quality student property available there is a huge, growing demand and therefore very high returns available for savvy investors
Is it fully managed?
If so, by whom? Ensure your student property investment is managed by a credible company opposed to just anyone. The leading management companies will only take on the best products that are sure to attract consistently high rental demand.
Location, Location, Location!
Many student developments claim to be situated in prime locations but actually are on the outskirts of major towns and cities. Anything other than city centre is not worth your time. Students want central locations therefore properties located in city centres always rent out first. Make sure your student property has a city centre location otherwise you will struggle to rent it out, and ultimately exit later down the line.
Look at the developer’s reputation
Who are the developers? Who are the construction company? Are they award winning? What else have they built? Make a point of looking at the people who have created your student property investment to avoid disappointment and low occupancy rates.