If you’re considering investing in student property but you’re not sure where to start, Jerald Solis, Experience Invest’s Head of Business Development, has compiled top 5 tips for student property investment to help guide investors to a successful property purchase.
When considering a Student Accommodation project investors should always be mindful of its proximity to the university. Being within easy reach of the University Campus is a must where the golden rule is; the closer you are the quicker the property will be tenanted. It is also important to consider the development’s proximity to local shopping and entertainment as well as good public transport links.
However, being further away from the University Campus does not mean that you should not consider it for your portfolio. The project can overcome its disadvantage by having better facilities or have oversized accommodation.
Student accommodation projects in less central locations are also often priced at lower rental values. These options lower priced options are attractive to students who are often happy to cycle or use public transport or even have cars for that matter.
When considering a good Student Accommodation investment you have to be mindful of the size of the student body attending the particular university in the town or city. It is always important to have a shortfall between the number of students attending the university and the supply of beds being supplied by the university and private landlords. Having a shortage in supply will help to ensure high occupancy levels and will help to safeguard yields and secure the long term health of the investment.
When considering demand it is worth looking into the number of purpose built accommodation against Houses of Multiple Occupants (HMO). An ideal project will be in a location where there is a limited supply of HMO’s as they can sometimes be hard to compete against as they are often priced extremely low for rental but are largely substandard properties.
Looking into the University’s forecasted intake or expansion plans will also be a good guide to demand. A University with new facilities being planned or built will have expansion in mind and will therefore mean that the demand for accommodation will be greater.
A measure of any good investment has to be its yield profile and it is always advisable to ascertain whether the projected yields are achievable from the very beginning. Looking into and carrying out due diligence into the current student market and what neighbouring developments are charging is essential. The yield profile must be in line with the existing rents being charged to ensure you receive realistic, sustainable and stable return on your investment.
Looking into what the local University charges is always useful as they are often heavily subsidised against the private accommodation providers. A Student accommodation project which is pegged against the local University’s rental charges will fare better than those that have based their prices on the private sector. In cases where rental prices have been based on private rents, it is advisable to look at the management company being used as their track record may give you comfort on them being able to achieve these rents.
4) Management Company
The importance of having a good management company with a track record for maintaining properties to a high standard is another cornerstone of a good investment. A Student Accommodation project with good management will mean the investor can be truly hands-off and will ensure the long term viability of the investment and provide income security.
It will be the Management Company’s responsibility to ensure that the building is maintained to a high standard at all times and run the building as cost effectively as possible. Typically all management fees and maintenance will be deducted before you receive your returns and should be taken into consideration when purchasing student property.
5) Investor Security
Investment security should be at the core of every investor and when considering a project it is advisable that the following is adhered to:
1. Only look at projects where Planning Permission has been granted as this negates development uncertainty.
2. It is also important to ensure that you’re in a safe buying environment whereby Legal Contracts have to be designed to maximise investor security.