Investment in student property is potentially very profitable, but not all properties are suitable. It is important to know what to look out for with regard to location, market value, type of student accommodation, property management and rental guarantee.
Demand for student property is always highest when it’s in close proximity to a high-ranking university and in cities where there is more than one seat of learning available.
The Best Location
The location within such a university town or city is also an important consideration, and the best area will always be one that is the most convenient for students. This will generally be an area that provides good local amenities as well as being within easy reach of the main campus.
Most students prefer living in a central location where there is plenty of nightlife and good public transport connections to other parts of town – as well as to other parts of the country. Student properties on the outskirts of town can be harder to rent out and are generally not worth the investment.
Low or High Market Value
A student property with a low market value has less potential and will provide lower rental income. It is worth remembering that it is not possible for anyone to get a mortgage on any individual unit that is not self-contained, such as a bedsit or studio with a shared bathroom or kitchen, and you have to consider the impact this will have on your exit strategy.
Also, students today expect a higher standard of accommodation than they might have done in the past, so bigger and higher-quality properties are more in demand.
Family Home or Purpose-Built Accommodation
A home with multiple occupants is known as an HMO (house in multiple occupation) and for some investors, a family house that can accommodate a number of students might be the most affordable prospect.
However, there are more benefits to be gained by owning a student property that has been purpose-built. The biggest benefit is that the return can be as much as 70% higher from a multiple-occupancy purpose built complex.
Investing in a purpose-built, multi-occupancy property makes it possible to get started as a property investor by purchasing one or more single self-contained units within a complex. The cost per unit will naturally be much lower than investing in a complete family home.
Many students prefer to be in purpose-built accommodation too. A typical modern-day student will not be prepared to accept low quality accommodation and they will want to be in a desirable location as mentioned previously.
Fully Managed Student Property
By purchasing a fully managed student property, you will reduce the amount of money and time spent in the future on repairs. A reputable management company will never take on a poor quality property. So, when you purchase one that is fully managed, you will need to check out the reputation of the management company before committing. If it is known to be reliable, you can generally consider it to be a good overall investment. Remember to weigh up the risks verses the rewards of investing in student property.
If the property management company is also responsible for other student properties and the property developer also has relevant experience in student accommodation, there is a better chance of having a stronger return on investment over the long-term.
Rental Guarantee Period
Some student housing developments come with a longer rental guarantee period than others. The length of a guaranteed return will be reflected in purchase price and the best deals will often offer two years or longer.
Taking these points into account while you are searching for the best investment option will stand you in good stead. Simple background checks and a little research will put you in a far better position than you would be to make a solid decision; one that will see you reaping the rewards from your investment for many years to come.
If you enjoyed this blog post then perhaps you would like to read “5 Mistakes Property Investors Make“?
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