Despite the constant uncertainty caused to university students due to COVID-19, the latest Student Accommodation Annual Report shows that the market has stayed remarkably resilient.
This includes purpose-built student accommodation (PBSA) and converted houses of multiple occupancy (HMO). The number of new beds available for rent to students is increasing, and the development pipeline is strong. And for those property investors who know where to look, excellent HMO investment opportunities are available too.
Investing in student accommodation continues to be a good option.
Currently, there are 681,000 student accommodation beds in the UK. For the new academic year (2020/21), a further 24,799 beds will be entering the market, representing a net increase of 21,000.
Furthermore, 115,000 beds are in the development pipeline, although just 58% have full planning permission. Our portfolio of carefully sourced properties is primarily based in the Northwest of England, concentrating on Greater Manchester due to the stream of tenants available.
Investors need to note that students are no longer happy to put up with less than high-quality accommodation. These days they pay much more for their residential accommodation than in the past, and they expect high standards and reliable management of the property and their changing needs.
The increase by 17% for the price of a brand-new university en-suite bed for students in the new academic year compared with 2019/2020 reflects this. The overall student accommodation sector, including HMOs, converted from terraced properties, is worth about £60 billion, and it’s increasingly the choice for investors who want something long-term for their portfolio.
The student market is ideal for new and established property investors
Investing in student accommodation is a good way into property investment for those new to the idea. Generally, you can expect higher – and relatively reliable – returns and lower risks than other types of investment.
Official information says that students in the UK will be heading back to campus when the academic year starts in September, hopefully putting an end to the uncertainty of COVID-19.
As landlords aren’t liable for council tax on student properties, rental income tends to be higher too. Specific regions in the UK will give you higher returns and allow you to make more money, thanks to the lower upfront costs.
Over the last decade or so, student accommodation has grown enormously. This has led to it becoming ever more popular with property investors. By working with the right type of property management services, investors can mitigate the risk even further.
What are the benefits of investing in student accommodation?
Properties suitable for student accommodation are usually less expensive to buy as they are generally located on the outskirts of a university town or city or the fringe of the campus. Therefore, they start as a more affordable investment than other property choices.
As the property will usually house at least three tenants (and sometimes many more in large HMOs), the investor has several income streams.
In the right property in the best kind of location, student property investors can achieve up to 20% higher yields than a single-family buy-to-let.
There is always a steady demand for tenants as students will always need accommodation. This vastly lowers the chances of any void periods where you’re not making any income.
There are, of course, drawbacks and risks to this kind of investment. For example, landlords renting HMOs to students will more than likely find themselves spending time, money and effort on maintaining a property that incurs high levels of wear and tear. Therefore, investors have to take into account the costs of keeping the property in good condition.
What are some of the risks associated with investing in student property?
Investors must also check out the licensing requirements in the area they want to purchase an HMO. You must have the right kind of licence, and these vary from local authority to local authority. This may mean extra set-up costs before you can start to make an income.
Furthermore, when you have found a property and got the licence, you will need to ensure the house fulfils the legal requirements. This may mean making relatively significant changes to the property.
Students generally move out of halls of residence and into HMOs in their second and final years. Of course, some may go straight into shared accommodation, but that’s the general rule. Properties vary between three and six rooms, although it’s possible to have a larger HMO.
Students in the 21st century have much higher standards than those decades ago. So, for any investor new to this market sector, it’s essential to understand that they expect high-quality, well-maintained accommodation. Offering good quality housing is essential, and it’s what will guarantee a full house all year round.
Landlords and investors are competing with the purpose-built student developments, which means there must be a good standard of accommodation. More space, well-appointed communal living areas and decent facilities will go a long way to ensuring reliable yields.
Working with the right firm can maximise yields and minimise stress
At HMO Property Designs, we have many years of experience in this sector. We have developed investor-specific strategies to maximise their outlay and operate differently from many firms.
For example, we already have a portfolio of vetted and carefully selected terraced houses for sale through the vendor. We’ve chosen these for their proximity to the universities and other facilities and for their layout. Most of our properties are four-bed HMOs, although we do have some three-bed options too.
As the investor, you buy the property directly from the vendor. Meanwhile, we plan the reconfiguration of the house for your specific needs and then oversee the entire process. We also provide tenants fully vetted with deposits already paid when the HMO is ready for occupancy.
We deal with all of the regulatory frameworks, the legal requirements and all necessary compliance. We also offer a property management service when the house is occupied, so it can be an entirely passive income for the investor if you choose. All of this lowers your risk on the investment and guarantees you an income and valuable and reliable addition to your property portfolio.
Interested in investing in student accommodation? Contact us today.