Is student accommodation a good investment?
Student accommodation continues to offer great investment returns due mostly to the growing student population in the UK
There was an estimated population of 2.75 million students at UK higher education institutions in 2020/21 according to Statista. Further to this, for the September 2022 intake, there has been an increase of 5% in UK undergraduate applications.
These figures, along with the UK’s housing shortage, demonstrate that there is still large demand for student accommodation and property investors can still make excellent profits through this strategy.
Is student accommodation a good investment?
Student accommodation continues to offer great investment returns due mostly to the growing student population in the UK
There was an estimated population of 2.75 million students at UK higher education institutions in 2020/21 according to Statista. Further to this, for the September 2022 intake, there has been an increase of 5% in UK undergraduate applications.
These figures, along with the UK’s housing shortage, demonstrate that there is still large demand for student accommodation and property investors can still make excellent profits through this strategy.
The Types of Student Investment
Purpose build student accommodation
This type of investment is typically built brand new by private developers for university students, and it can take the form of apartments/studios or a modernised version of halls of residence with amenities such as a lounge, gym, or outdoor space.
Student HMO
This is typically a house or flat for three or more people who will share facilities like a bathroom and kitchen.
PBSAs vs Buy-to-Let
With more students now having higher expectations of the quality of student accommodation, purposebuilt apartments are becoming more in-demand. Features such as fast WiFi, modern fittings and furnishings are top priorities for many students. Buying property to convert into a HMO will usually cost a considerable amount of money, so it will take a while to start getting a return on the investment. Investing in PBSAs has become more popular, especially with investors who are looking to make profits as quickly as possible
The Types of Student Investment
Purpose build student accommodation
This type of investment is typically built brand new by private developers for university students, and it can take the form of apartments/studios or a modernised version of halls of residence with amenities such as a lounge, gym, or outdoor space.
Student HMO
This is typically a house or flat for three or more people who will share facilities like a bathroom and kitchen.
PBSAs vs Buy-to-Let
With more students now having higher expectations of the quality of student accommodation, purposebuilt apartments are becoming more in-demand. Features such as fast WiFi, modern fittings and furnishings are top priorities for many students. Buying property to convert into a HMO will usually cost a considerable amount of money, so it will take a while to start getting a return on the investment. Investing in PBSAs has become more popular, especially with investors who are looking to make profits as quickly as possible
Points to consider before investing in student accommodation
1. Cash Only
Many investment opportunities on the market by way of student accommodation are limited to the funding that they can be given. PBSA can not be funded with mortgages from banks so will require a fully funded cash purchase. Student HMO’s often have difficulty securing a mortgage due to additional regulations.
2. Higher yields
Student investment in many areas come with higher yields than other property investments and longer assured returns. Rentals on student investment are typical 1-3 years and the average yield in large cities are 7% and above.
3. Lower Capital growth
Capital growth is usually lower than a residential investment, this is offset with additional advantages such as the security of a guaranteed income for a set amount of time
4. Location is Key
Establishing which cities and locations across the UK to invest in can be complex. Factors to consider are university size, population factors, transportation services and investment opportunities. The right locations might mean your propertyis in higher demand making it a smarter long-term investment.
5. PBSA or HMO
Choosing between HMO or PBSA can depend on your financial backing, the location you’re choosing to invest in or your choice of management. HMOs require an HMO mortgage whilst you can’t get funding for PSBA. The location depends on the demand in areas and what is available. Finally, management, PBSA usually come fully managed whereas an HMO you must manage yourself or pay an external company to do so.
Points to consider before investing in student accommodation
1. Cash Only
Many investment opportunities on the market by way of student accommodation are limited to the funding that they can be given. PBSA can not be funded with mortgages from banks so will require a fully funded cash purchase. Student HMO’s often have difficulty securing a mortgage due to additional regulations.
2. Higher yields
Student investment in many areas come with higher yields than other property investments and longer assured returns. Rentals on student investment are typical 1-3 years and the average yield in large cities are 7% and above.
3. Lower Capital growth
Capital growth is usually lower than a residential investment, this is offset with additional advantages such as the security of a guaranteed income for a set amount of time
4. Location is Key
Establishing which cities and locations across the UK to invest in can be complex. Factors to consider are university size, population factors, transportation services and investment opportunities. The right locations might mean your propertyis in higher demand making it a smarter long-term investment.
5. PBSA or HMO
Choosing between HMO or PBSA can depend on your financial backing, the location you’re choosing to invest in or your choice of management. HMOs require an HMO mortgage whilst you can’t get funding for PSBA. The location depends on the demand in areas and what is available. Finally, management, PBSA usually come fully managed whereas an HMO you must manage yourself or pay an external company to do so.
Download Our Student Investment Guide
Find Out More
For more information on UK Student investments access our Student Investment guide or to speak to an Investment Consultant either call or email us on:
0151 433 9300
contact@advantageinvestment.co.uk
Download Our Student Investment Guide
Find Out More
For more information on UK Student investments access our Student Investment guide or to speak to an Investment Consultant either call or email us on:
0151 433 9300
contact@advantageinvestment.co.uk