Student Investment Model

This comprehensive guide is tailored to those looking for a lucrative investment in the UK. It outlines all the basics of a student investment and how the strategy functions.

Why Invest in Purpose Built Student Accommodation?

Many Universities across the UK tend to lack a supply of purpose-built student accommodation (PBSA) reason Houses with Multiple Occupancies (HMO), have been the main driving force for investors in an attempt to fill these voids within the property market since the 1970s, for example, your typical 5-bed house converted into HMO accommodating 5 tenants increasing rental returns substantially. Although the HMO model is very popular we are still far behind the demand and local councils simply have not been able to keep up with, the reason they approve plans for PBSA.

Private developers have started to step in and where we also start to get involved, it is important to be aware PBSA is a similar but separate strategy to that of an HMO which is in direct competition, although both still fall under the commercial umbrella PBSA will likely be apart of block accommodating students only, with facilities such as gyms, study areas, bike stores, laundry rooms, and a concierge. PBSA is the more popular choice for parents and students when selecting accommodation due to facilities on offer such as security, on-site staff, and properties being self-contained as opposed to being shared.

This type of accommodation to be approved by local councils must be in demand and within the University campus itself or in proximity. The majority of PBSA can also come with university involvement in regards to advertisements as student halls of residents, this of course eliminating your property from the local rental competition. for investors, this type of investment will tend to come completely hands-off with properties fully managed on-site and long-term rental profits. in most cases rental profits per year at around 8%+ Net (annum) of the price you pay.

Our student investment options are top-of-the-line and completely off-market, giving you exclusive access. Imagine yields of 8%+ that far surpass the average UK yield of 4%.

FAQs

Lets get the basics out of the way

  • Student property investments are investment properties that have been bought to rent exclusively to student tenants. Traditionally, student property investment referred to HMOs, otherwise known as houses of multiple occupancies, you also have student halls that tend to be the on-site or close proximity of the university or college. student halls or purpose-built student accommodation (PBSA) will tend to come in form of self-contained studio apartments.

  • The short answer is no, the tenant must be a student due to the planning permissions agreed by the local council at the time the building was built or being built, usage can be changed but must be agreed upon by the local councils, this was evident during the COVID pandemic when student classification properties could be let to the open market. HMO yes, you can.

  • In most cases taking my experience of being involved in these purchases, they tend to always be a cash purchase or cash stage transaction, majority of purpose-built student accommodation you will buy will be whilst being constructed, for example, if it’s under construction you are likely to be on a payment plan through your solicitor up until the construction is complete, other reasons are down to the classification of property which tends to be commercial oppose to standard residential, student property will likely come with onsite facilities such as Gyms, Concierge or other communal areas for residents.

  • You can sell the property when you wish, you would be the owner after all. You can choose to market through agencies like any other property on the market however, you are likely to go back through an investment agency or portal like this. Of course, owner-occupiers are more likely to purchase homes, these types of assets that generate high rental income are still very attractive to other investors especially if it’s built and already tenanted which offers a strong re-sale market.

How Would It Look?

We recently got involved in PBSA within the Huddersfield area. It was a popular choice for investors given the proximity to Huddersfield University and the new student Health Innovation Center bringing in a further two thousand students into the area, of course filling the void for practice nurses and doctors studying in this area, feel free to take a look at the finish.

International Students in UK Growth Trend Over the Years

  • According to 2020/2021 statistics from the Higher Education Statistics Agency, there are currently 605,130 international students pursuing their degrees in the UK. The number has experienced an increase from the previous year’s statistics which encompassed a total of 556,625 international students.

  • Compared to the previous year (2019/2020), the number of international students in the UK has experienced significant growth. Specifically, an increase of 8.71%.

  • The total number of students enrolled in Higher Education institutions in the UK currently stands at 2,751,865, across all institutions. This is an increase of 8.7%

Created by studying-in-uk.org

Further information you may need to know

What does a payment plan look like?

This really depends on the developers and what they want as commitment however, the majority of payment plans can look like this, 50% down when you exchange contracts via the solicitors, 25% down halfway through the build, and finally the 25% down on build completion, this is of course when your rental returns will start.

Why not buy something already completed?

PBSA of this specification will likely be sold under construction, this is where the best deals are off-market, of course, you can get lucky and try to catch an investor wishing to sell his property however, it is doubtful given the returns they generate. We have re-sold apartments like this within the first week they become available. of course, you can always browse the open market.

What do the figures look like?

Typical prices are from £60,000 to £85,000 depending on area and market. Returns of around 7% Net up to 10% Net per annum, student properties like this will come with a rental guarantee between the first 3-5 years of ownership, fully managed and under a rental contract, you will likely be paid per quarter of the year.

How does the rental guarantee work?

You are paid per quarter of the year, if you bought £80,000 with an 8% guarantee you would receive £1,600 every 3 months. under such guaranteed contracts, you also do not pay any service charges or management fees since this was already factored in before you were offered this rate. in most cases the only outlay is the ground rent again these can vary from £250 to £350 paid per annum.

Why do we get offered a guarantee?

Developers and management teams offer rental guarantees for a purpose, if you are being offered 8% the gross rental income will likely be around 12%, you can check Rightmove quite easily to understand what rents are achievable. they then lock you in for 3-5 years and increase the rents each year by around 3%-5%.

Damages and maintenance?

These types will come fully managed which means any internal issues, damages, and complaints are dealt with via the management team. students will pay a deposit like any other rental which will cover minor damages, however exceeding the deposit the guarantor is then contacted which tends to be the parents. properties are also inspected by staff on-site throughout the year.