When it comes to property investment, we’re quickly realizing that you don’t need to be a millionaire just to make a good return. Rather than buying full properties and building a portfolio this way, for example, more people are now choosing to invest in hotel rooms and, as this guide will explain, student accommodation. Why? For one thing, the positive returns.
What is Student Accommodation Investment?
Just as the name suggests, this investment opportunity will see your money invested in a property specifically designed to be student accommodation for a nearby university. Rather than typical properties you might find on the market, students are typically happier to live in dorm-style accommodation with a single kitchen, bathroom, and living room between them. With this in mind, it allows very good returns for investors.
Student Accommodation Investment in 2019
If you’re worried about Brexit and how the economy may change in the coming months and years, student accommodation will actually make for a steady investment. According to recent activity in the market, student property developments are thriving and the demand for them seems to be higher than ever. In fact, many of the property developments designed for investors have already been sold for 2019.
Fortunately, at Property Invest UK, we can help you to get started and already have some brilliant opportunities in both Liverpool and Newcastle. With the properties managed by an experienced and reliable student accommodation management company, this is the ultimate hands-off investment and will allow you to earn passive income while you turn your attentions to other matters.
Why Invest in Student Accommodation?
Now we’ve answered ‘what is student accommodation investment?’, you might be wondering why you should even consider this investment option. Although we’ve touched on a couple of reasons already, let’s take a deeper look!
Generous Returns – First and foremost, the aim of any investment is to generate some income (we wouldn’t be paying the money if we didn’t expect something in return!). With student accommodation, this has been the best performing asset class for around eight years (since 2011). As well as private investors, the niche has even attracted interest from institutional investors. If we look back to 2016, we find transactions totalling over £3 billion and this perhaps shows the size of the industry right now.
Constant Demand – At the beginning of the 2018/19 academic year, more young students had been accepted through UCAS for a university education than ever before. We’ve broken down the percentage of 18-year olds who had been accepted from each country below;
Northern Ireland – 28.1%
England – 27.9%
Wales – 26.3%
Scotland – 25.9%
What does this mean for your investment? Well, a significant percentage of these students will be moving away from home and it means they need somewhere to live. In areas with large student populations – such as Liverpool, Birmingham, Bristol, and Newcastle – student accommodation is in high demand. If you’re able to choose a location that’s close to the university as well as offering plenty of amenities, the property will be incredibly attractive and it won’t be long before students are fighting to live there.
Passive Income – As mentioned previously, the very best companies offering this type of opportunity will have excellent property management companies looking after the student accommodation which means that you don’t have to deal with any problems that arise. For example, our stunning Aura project in Liverpool will have properties managed by Urban Bubble so you don’t have to worry about a thing.
Essentially, the management company will cover everything from seeking tenants to vetting them and collecting all payments when they’re due. Additionally, they’ll maintain the property and the income you earn becomes entirely passive. While on the note of our Aura project, it offers an 8.5% net rent guarantee for five years which shows just why we said the returns were ‘generous’ earlier.
Risks of Investing in Student Accommodation
In answering ‘what is student accommodation investment?’, we should also address the potential pitfalls because every investment opportunity will come with some risks. While student accommodation investment does lend itself to those with smaller budgets, this also means that there won’t be much to gain in resale value or in capital growth potential. The flip side to this argument would be that this isn’t exactly what they’re designed for; their main purpose is to allow investors with low budgets an opportunity to get onto the property ladder while earning a passive income…and this is where they thrive.
In addition to this, investing in student accommodation can also be a huge risk when the infrastructure isn’t in place for their effective management. While advanced investment opportunities will ensure the property is managed effectively and without input from the investor, others won’t have this experience and it can cause issues.
Finding a Student Accommodation Investment Opportunity
If we’ve piqued your interest in this growing niche, you’ll need to find legitimate opportunities from companies who have experience in the market. As with every growing market, you’re likely to come across some new companies who promise opportunities, but we recommend looking for experience. Especially when you consider the upcoming disruption that could be caused for the whole economy in the UK, we think experience will be needed to navigate the tricky waters.
Secondly, the industry needs investors so don’t ever feel as though you’re doing somebody a favour by investing. At all times, your chosen company should be pleasant and they should be willing to help you wherever required.
Thirdly, make sure you understand the ins and outs of the contract before signing anything. Will the student accommodation be managed? Will you have to do anything once the contract is signed? Are the returns fixed or guaranteed for a set period? What happens if the ‘unlikely’ happens and no tenants are found?
With an experienced partner like Property Invest UK, you can reap all the benefits we’ve discussed (including a passive income) in no time!