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Student Accommodation Investment

The term ‘Student Accommodation’ is relatively self-explanatory. It refers to a university or college residence containing living quarters for students. Alternatively, some third party organisations outside of the university arrange living quarters in central locations around hotspots which host a range of students each from different universities.

With the ever-increasing rise of students choosing to go to university, the rental demand for university accommodation has surged. In 2019/20 there were 2.46 million students at UK higher education institutions, demonstrating a strong 10%+ growth in student numbers since 2012.

To further add, 2020 was a year of extreme growth within student accommodation investments. A grand total of £5.77 billion was invested in purpose-built student accommodation (PBSA), demonstrating a 5.7% increase from 2019. Overall investments were 0.8% higher than they were in 2015, setting off new records.

Why should I invest in student accommodation?

Although COVID has had a detrimental affect on all sectors within the market, UK higher education still remains a highly attractive option for both national and International students, evidently shown by the 8.4% increase in UCAS applications in 2021. This all contributes to the high in-demand figures for student accommodation, which remains a lucrative investment to date.

High Return On Investment Yields (ROI’s)

With the high figures of new students starting full-time education, the rental market for student accommodation is constantly on the rise. The average student rent in the UK stands at £126.42 per week, yet varies according to location. Those within London have an average weekly rental rate of £150 per week, whereas areas around Newcastle spend far less cultivating to an average of £108 per week. Rental yields differ in accordance to location, which is why it’s imperative to research the market before investing, however, rental yields for student accommodation can go as high as 7.2%+ as reported from The University of Dundee in Scotland.

To further commentate, The University of Aberdeen and Strathclyde had rental yields of 6.8% and 6.62%, illustrating the profitable yields student accommodation can bring forth. Overall, across the UK the average rental yields sit at around 4.4% which is pretty high considering the low investment price for student accommodation in comparison to those of a house.

Other buy-to-let student accommodation investments within UK hotspots such as Birmingham provide a lucrative 6.5% yield, with Leicester being one of the highest yields in England displaying yields of 6.56%. Close yields are featured in cities like Nottingham and Newcastle, both which sit at 6.39% and 6.3%. Whereas Liverpool and Manchester average 6.1% and 5.2% respectively.

For those looking for higher investment yields, investing in student accommodation HMO’s tend to perform significantly better than single room investments. This is based on the fact that you can charge the same rental rates for multiple students towards the whole house in comparison to charging one person solely off of a room. HMO’s produce high lucrative yields of around 11% or higher depending on location.

 

Low Risk Investment Prices

An extremely advantageous point to remark on about student accommodation is that in general these properties are low-level investments with prices starting as low as £40,000. Even with low investment prices, these properties offer lucrative rental yields to contribute to your overall passive income. A large amount of beginner Investors feel more secure by investing in entry-level investment opportunities, which offer low-level risks as their entrance into the property and investment sector.

Strong Sector

As more and more students decide to start and continue university degrees and programmes, the demand for student accommodation increases. Within the property sector, the demand will always surpass supply rates, therefore demonstrating the fact that the sector remains strong and viable within its positioning in the property market. Benefits such as these contribute to the fact that student accommodation offer a low-risk investment opportunity as there is always a wealth of students needing accommodation in university hotspot locations.

The Best Places To Invest In Student Accommodation

A key factors which will affect the rental yield of your investments is solely based on location which is why it’s imperative you research prior to making any decisions. As a general rule of thumb, properties within major cities tend to provide the most lucrative investment yields. However, when looking for student accommodation investment opportunities it’s best to base your location on cities in which have the highest rates of students across the UK as the demand will be stronger. The key student accommodation hotspots include:

  • Brighton
  • Nottingham
  • Birmingham
  • Leicester
  • London
  • Aberdeen
  • Edinburgh
  • Coventry
  • Glasgow

The potential downsides to student accommodation

As with all investment opportunities, it’s necessary to weigh up the pros and cons before making a decision. Student accommodation investment opportunities are no different in that regard and will sometimes host a range of cons that differ from a typical single family house investment opportunity. The potential pitfalls of investing in student accommodation include, but are not limited to:

Property Damage – Houses and rooms hosting students tend to face more wear and tear, as opposed to a single family house. A positive to this is that many students need to put down a deposit which they will be given upon leaving the property minus any surcharges for property damage.

Higher Levels Of Management – Close management is required for properties such as these, due to the nature of the tenancy agreement. Luckily, many investment opportunities like ours are fully managed, offering you a hands-free and hassle-free opportunity whilst we take care of management.

Consent & Licenses – Caution and research is required for these types of investments as they usually need extra set-up, licensing and planning consents granted, especially in regards to HMO’s.

School Terms – Another key thing to consider is that properties are mainly occupied from September to June/July for single room student accommodation. Summer periods in general will face lower occupancy levels.

However, many HMO properties tend to offer all-year-round tenancy agreements which rectifies this issue.

Conclusively, we have touched on the major aspects towards investing in student accommodation along with the plethora of advantages and the potential pitfalls towards these investment types. It’s always worth consulting an advisor and researching prior before committing to any investment. For your chance to book a free consultation with one of our highly experienced property sales consultants to discuss your financial needs and objectives, please follow the link https://calendly.com/rknight1 so we can arrange a time to meet you and set an action plan going forth.

Alternatively, please email us at info@big-roar.com or call us on 0116 232 5129 to speak to one of our advisors.

Big Roar is a boutique Property Investment company with a wealth of experience that offers high quality in demand investment opportunities in the UK and worldwide. The aim is to deliver unique property developments either through developer led investment or providing pre-launch or off-market access.  

2021 has seen a period of great transformation and growth which has enabled our company to grow and diversify from the traditional property investment model allowing us to launch our Sub-Agent product – allowing individuals and companies to utilise our skills and experience to on sell our wide and diverse portfolio to their own networks and wider audiences.  

Our focus is you. Each investment we launch is rigorously assessed by our in-house team of analysts, and our Portfolio Management team monitor the progress of each project, updating both investors and the developers providing you with a truly hands-off investment experience.

Whether your requirements of new property or off-plan developments for resale of buy-to-let, or high yielding rental properties that will serve well in either the serviced accommodation, short-term or long-term let market, we have complete confidence and proven results to ensure you receive exceptional return on investment.