Why invest in Student property?
For a number of years now investors have been redirecting their attention to alternative asset classes, verses more mature mainstream buy to let property investment, and student property without a doubt has been the most prominent and in-demand asset class.
First and foremost, the counter-cyclical nature of student property investment is a huge attraction. Notably, Purpose-built Student Accommodation was one of the few asset classes to show resilience during the 2008 financial crisis and provided investors with robust returns.
It also provides full ownership, like any buy-to-let property the investor has full asset ownership, which is registered at Land Registry by the conveyancing solicitor.
Two positives that attracts buyers to this investment is, regardless of the UK’s temporary Stamp DutyHoliday, there is £0 SDLT to pay on purchases under £150,000and secondly,what has been a wary point with off-plan projects in the past, majority of PBSA projects are ring-fenced to lessen the risk of investors deposit monies – which is commonly 50% of the purchase price.
Purpose-built Student Accommodation is professionally managed on a full-time basisby a specialist management & letting company, meaning hands-off, passive income for investors.
This facilitates the high rental return, with 7%, 8%, 9% even 10% netrental yield per yearnot hard to come by. And what’seven more attractive is the rental return is assured (contractually) for the investor by the developer for the first three to five years from project completion.
Where to invest in Student property
Be diligent about the university or universities – there are many higher education institutions in need of a government bailout. Look at universities for specialist areas/facilities, like Medical schools and engineering depts. – this attracts the ideal overseas& domestic tenant for PBSA.
Buy where there is a good balance of overseas students verses domestic students.
Be diligent about the student numbers overall and the undersupply ratio in the university town or city.
If buying off-plan;
Buy where the project will finish in time for the 2021/22 in-take.
Carry out extra due diligence on the financial structure offered by the developer, we don’t expect projects to become all of a sudden unviable due to the pandemic, but we can easily see where not to buy PBSA.
If buying stock already completed or completing Q4 2020;
Buy where the assured rental return is sustainable and does not appear too high. For example, if you are being offered 10% net assured and the PBSA is not literally on/next to the campus, or, it’s not in a second or third tier city where land is much cheaper – dig a bit deeper!
Buy where the developer has a clear contingency plan for any assured rental return shortfall – this is normal in the first year anyway – but even more important going into the 2020/21 academic year.
How to invest instudent property
To ensure you are getting the best returns and because student accommodation (PBSA) developers use specialist investment agents and brokers, the safest bet is to speak to a PBSA investment expert, as they will supply all the information you require, covering deep due diligence such as: developer check, project suitability, project details, management & lettings, location review, solicitor & contracts check.