Student housing investments have become arguably one of the most marketed property investment models in recent years, possibly only surpassed by Buy to Let. The UK is well known world-wide for its colleges and universities making it attractive for foreign investors and appealing as a reasonably simple investment concept.
Traditionally, student accommodation housing supply was largely derived by local landlords converting town houses and semi-detached properties for students that did not qualify for or could not afford on-campus housing. As housing regulations have improved over the years the conversion of property for this purpose has become less viable.
As a result, many educational institutions have ventured into providing and controlling more student housing inventory using management companies. Subsequently, newer and safer housing attracts more students to their institution which of course brings more revenue in the form of fees for the university.
With most universities being located in heavily populated cities where land is often at a premium, many student property investment opportunities will be older buildings that are being re-purposed and redeveloped as opposed to brand new off-plan builds.
Although at first glance investing in student property might appear to be as fool proof as it gets, there are a few things to take into consideration before taking the leap.
There are two types of student property investment:
- Investment at the off-plan (or in many cases redevelopment) phase
- Investment into a finished (or soon to be finished) project that offers rental returns
Off-plan and redevelopment student property projects are usually focussed on capital gain – Buying in at the early stages before completion will usually result in a profit for the investor if all goes well. This however, is the key; the project needs to be completed and saleable for the investor to be able to liquidate.
Investing into finished or near completion projects tend to be more income focussed – The student housing complexes are usually managed by a company contracted by the developer or the university and handle the day to day maintenance and rental collection on behalf of owners making the investment relatively hands free for the busy investor.
In both cases there are things to look out for:
With off-plan investing – Take a good look at the developer. Have they completed other/similar projects successfully in the past? Where they on time and on budget? Did they run into any planning issues? (If not, it’s a good sign they know their way through the planning hurdles often encountered with city center construction)
Completed student housing offering a rental return relies upon an efficient management company – Take a good look into what else they manage. If this happens to be their first venture into the student property business it may not be a bad thing, but caution would be advised – even if they have similar property management experience (in the hotel industry for example), student property is regulated differently and has been subject to a fair amount of change in recent years.
Demand – Sounds obvious, but you will find demand far higher in some locations than others. Take the time to find out if the universities and colleges local to the development are expanding or if they have an existing problem providing accommodation for students. If not, are there significant expansion plans in the future that will increase demand?
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