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Top tips for investing in student property

With student housing becoming an increasingly popular investment in recent years, Mish Liyanage at the Mistoria Group explains how you could take advantage of potentially high yields.  

Record numbers of students attending university have pushed up demand for rental property in many UK towns and cities, resulting in a severe shortage of affordable student accommodation.

Last year, the government  lifted the cap on the number of places that universities can offer by 30,000, leading to increased competition between institutions and more places on offer.  According to UCAS, the number of university applicants has reached a record high, with recent figures showing a 3% increase in the number of applications, year on year.

Non-European Union students have been the fastest growing segment, with numbers increasing by 50% over the last 10 years. There has been extraordinary growth in UK student numbers over the past 20 years and while UK students have now stabilised, international student numbers are set to rise dramatically in the next decade,

According to house share site SpareRoom.co.uk, up to 22 professionals and students competed for every room available in university towns and cities in 2015. Just 40% of rooms in existing house and flat shares in the UK’s university top 25 cities are available to students, because some landlords are unwilling to let to students.

Unfortunately, university managed accommodation has not kept pace with the growth in student numbers and this is driving increased demand for HMOS and PSBAs, in many UK towns and cities.

Traditionally universities were responsible for providing good quality student accommodation. However, over the last ten years, demand for university accommodation has outstripped demand and the private sector has supplemented some of the shortfall.

 Student property is a robust  asset class. Since 2011, student  accommodation has outperformed  all other traditional property assets  and has been the strongest growing  investment property market in the  UK. 

 It has also continued to be one of  the most resilient investment  sectors, with rental incomes and property values remaining stable, or increasing. The attraction of the student accommodation sector has been driven by structural undersupply and positive rental growth.

Without doubt, the student rental market is the most financially lucrative for investors and landlords if it is managed well.  An investor can currently can buy a four bed HMO in a good location for students and professionals, fully refurbished and furnished and tenanted for the coming year, for less than £165,000 in the North West. 

Investing in student HMO accommodation offers a long-term investment option, as the property is highly likely to be in constant demand throughout the calendar year.  Typical rents

are significantly higher for student properties, than a comparable buy-to-let property in the same city.

So if you have decided that student property is right for you, below are some helpful tips to help you make a wise investment:

Dos

+ Find the right area where you have a reputable university which has a good reputation and high ranking

+ Location should be 30 minutes’ walk from the university

+ Find a reputable and credible agent to be your business partner

+ Always view the property and meet the agents in person

+ Research the company and key people via social media and their website

+ Ask for case studies and testimonials

+ Go for a student houses instead of pods. Houses have a resale market and are mortgageable

+ Rent should be all inclusive of bills and unlimited broadband

Don’ts

+ Invest in student pods

+ Go for off plan deals where you pay capital upfront and wait for years before you acquire the student apartment

+ Offer small cramped up rooms with no living space in a house

+ Cut costs and go for a lower spec property

+ Look to flip - student properties are medium to high yielding and long term investments

+ Try and do it on your if you have no experience on HMOs

Mish Liyanage is managing director at Mistoria Group.

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