Investing in student buy-to-let accommodation

With 532,000 students entering UK higher education in 2015 according to UCAS reports, the university population is continuing to grow across the country.

Despite universities offering a limited amount of student accommodation, many of these are prioritised for first year students and there remains a huge imbalance between supply and demand. The student accommodation market is currently following the trajectory of the Private Rented Sector, so much so that it has become an integral part of the buy-to-let market. The market has transformed with students desiring boutique luxury living in Purpose-Built Student Accommodation (PBSA) rather than the old-style university halls. With impressive yields and retention levels continuously high, investors are looking at student accommodation as a sustainable and lucrative alternative to residential property.

1.7 million

students currently study full-time at UK universities

£337 billion

Investment in the student housing sector reached £337bn in 2016

yieldit horizontal - April 2019

Student accommodation vs Residential property

Differences between a residential and student investment can be subtle, making it a difficult decision for investors to make. There are many benefits of both student accommodation and residential property, but student accommodation has proved itself to be a great diversification investment and one that generally involves a much smaller initial outlay.

Student accommodation

  • Students must generally provide a guarantor on application, which ensures rental payments will always be on time and in full
  • Demand is high for luxury new-build student accommodation
  • Resilience through the recession tears proves that it is a stable investment
  • Demand in university cities and towns remains stable, so void periods are kept to a minimum
  • Student accommodation tends to be much cheaper than residential developments
  • You can resell your student property on the open market (as long as it is marketed as a student development)

Residential property

  • Significant household growth and lack of access to mortgages has led to increased demand
  • Sky-high house prices make it impossible for the average family to afford to buy
  • Strong demand and very low housing supply
  • Government reforms support residential property investments
  • Northern Powerhouse initiative makes Northern cities more attractive to live in
Sheffield Guide horizontal - April 2019

Types of accommodation

  • Purpose-built student accommodation (PBSA):
    • Promotes luxury student living, offering students prime independent studio apartments and state-of-the-art communal facilities
    • Thriving rental market due to chronic under supply of student accommodation
    • Given the rising costs of university, many students are willing to pay a premium for a luxury, 'all-inclusive' service
    • The yields for PBSA surpass most traditional buy-to-let opportunities
  • Student pod
    • Single room within a student accommodation block, whereby students share communal facilities like kitchens
    • The cost of a single room compared to other types of student accommodation is significantly lower
    • Some student pods come with en-suite bathrooms, buy the majority have shared bathrooms
  • HMOs (Homes of Multiple Occupancy)
    • Dividing a large property into multiple occupancies will usually bring in a higher yield than if the property was let as a single home
    • These rental homes usually have shared communal areas and bathroom
    • Unlike student pods, HMOs can be re-sold to the whole of market, meaning more potential buyers
    • However, having to deal with multiple tenants can significantly lengthen the management time as opposed to housing with single occupancy

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