In order to ensure a sound investment, a number of aspects must be considered, including: what the investor genuinely wants from the investment, the type of student accommodation to invest in, what is likely to provide the highest and most sustainable returns, and how to ensure you work with a likeminded partner.
With this in mind, here are five of the top things property investors should consider before taking the plunge:
1. Choose the type of student accommodation you invest in wisely
The choice between purpose-built student accommodation (PBSA) and houses of multiple occupation (HMOs) is often an investor’s first consideration.
While both can provide good returns, changes in regulation for HMOs, coming into effect in the next academic year, will mean landlords now need to seek a licence for their property if it is occupied by five or more people living in two or more separate households, irrespective of the number of storeys the property spans.
It’s predicted that this change will impact 177,000 additional HMOs in England alone. As a result of this, we are predicting significant growth in PBSA as these changes can make investing in HMOs more complicated.
For those stuck between the two, PBSA could be your best option. Those that do decide to invest in PBSA need to think about whether they invest in a property containing cluster flats or studio apartments.
A mix of the two can be appropriate, and investors should partner with a PBSA provider that selects the most appropriate mix given the market in the locations they are developing in, rather than adopting a ‘design by spreadsheet’ approach.
2. Select a likeminded investment partner
Ensuring you partner with a student accommodation developer that holds similar vision and values to you is absolutely crucial.
There is nothing worse than getting too far down the line in a partnership and realising that you don’t actually agree with a lot of the things your partner stands for and how they operate.
While some PBSA developments are built with the ‘stack them high and fill them’ approach, at CityBlock we don’t believe this is conducive to a good living environment for students, as well as being extremely unsustainable.
Welfare has become more and more important in recent years, so accommodation providers must be equipped to provide the support, facilities and experiences students need to have a happy and healthy time whilst studying.
To ensure we’re meeting the ever-evolving needs of our students, we spend a lot of time obtaining feedback from them on what they value when it comes to accommodation, and equally, what they don’t.
Only by doing this can we ensure that our properties are fully let each year. Our investment partners are very much on board with this ethos, and it’s having these similar visions and values that ensures partnerships continue to run smoothly.
3. Do your research
Do your research on the business you are looking to partner with: find out more about their track record; their plans for the business over the next five years; their accreditations and industry awards; ask for case studies of previous work; enquire about standard investment returns you could expect.
Good providers should be able to demonstrate their expertise and provide examples of tangible returns they have delivered.
4. Encourage transparent working
It’s important that investors work with partners from the outset to establish clear objectives of the partnership and what they can expect from the investment. Investors should partner with a business that promotes honesty, integrity and transparency and you should only ever enter into an investment agreement with somebody you trust.
We promote long-term investment, rather than short-term returns – something that we find results in better overall returns for investors. However, this might not be ideal for an investor that wants very quick returns. For this reason, it’s also incredibly important to ask yourself what you want from this investment from the outset and choose your partner accordingly.
5. Work out the level of input you’re willing to give
Depending on the type of investment selected, investors will be required to contribute varying levels of their time and expertise into the partnership.
Some investors are happy to give lots of their time, whereas others want to take more of a back seat.
As developing and managing student accommodation is so hands-on and requires high levels of knowledge and expertise, investors usually choose to partner with an expert and leave them to do the work.
Investors into student property - as long as they partner up with the right operator - should benefit from a relatively low risk investment with high returns, without significant involvement in the day to day operations of the business.
Ultimately, when looking to invest in student accommodation, it’s sensible to select an agile, experienced partner that shares similar vision and values to you.
Selecting a partner that puts students first in the development and management of properties will lead to developments that are filled quickly, every time.
*Trevor Bargh is chief executive officer at CityBlock