Why investing in student housing can bring reliable yields

The market has stayed remarkably resilient despite the uncertainty caused by COVID-19 over the last 18 months.

According to the latest Student Accommodation Annual Report, the number of new beds added to those available to students is increasing year on year. Currently, there are 681,000 beds for student accommodation spread across the UK. In the new academic year, starting in September 2021, a further 24,799 will enter the market.

How is the UK’s student accommodation market currently looking?
Student accommodation for investment purposes is in the form of purpose-built blocks of rooms or houses of multiple occupations (HMOs). These are usually converted houses that were used for different purposes, such as a family residence.

The HMO Property Designs portfolio of properties available for HMO investors is based mainly in the northwest of England.  We source properties based on their proximity to major universities and their high quality but relatively low cost to purchase.

By investing in HMO properties in the Greater Manchester area, for example, you can take advantage of Manchester’s highest number of students in the country. And they all want somewhere to live.

Investors should note that students demand high-quality, well-maintained accommodation and flexibility from the landlord. They pay higher prices than ever before for their accommodation and naturally want the best they can get.

The student accommodation sector is worth around £60 billion and has become the obvious choice for investors who want to add to their portfolio but not take on too much risk.

Ideal investment opportunities for established and new investors

Investing in student accommodation is particularly useful for those new to the property sector. There are fewer risks, particularly as all students will be back in person on campus for the new academic year.

The dynamics of student accommodation investment tend to give more assurance for higher yields and less likelihood of dealing with void periods. Student accommodation generally has a higher return than other types, not least because there is no council tax to pay.

Different regions of the UK give investors higher or lower returns on student property, depending on the cost of the property and set up costs. But all around the UK, this sector has grown exponentially over the last ten years or so. Many property investors now choose to expand their portfolio by including some form of student accommodation within it.

It’s always a good plan for investors to work with a dedicated, expert property management and investment firm to mitigate any risks by investing in this sector. At HMO Property Designs, we’ve put together unique investment strategies for people who want to reap the benefits of student accommodation but want to hand over the set-up costs to an expert team.

Why does investing in student accommodation offer benefits?
Generally speaking, the kinds of properties that can be reconfigured into student HMOs are less expensive. They are usually situated on the outskirts of the university campus or the fringe of the city centre, which automatically lowers their price to buy.

The property will usually need to house at least three tenants, although HMOs can run to many more rooms. Either way, because there are multiple tenants, the landlord receives multiple income streams, making it more profitable than a standard buy-to-let property that houses just one family.

As there is always a demand for student accommodation, there is also less chance of losing income from empty rooms. However, there are risks associated with investing in student property, just as there are with any property investment.

For example, the upfront costs tend to be higher as houses must be reconfigured correctly and set up to comply with regulatory standards. Once tenants are in place, there is a higher likelihood of heavy wear and tear, which means costs can mount up for the management of the property.

Furthermore, it may be necessary for the investor/landlord to secure a licence. Licence requirements vary depending on the local authority, so it’s key that investors understand the requirements for the property they’re interested in.

What we do differently at HMO Property Designs
We know that there are fantastic investment opportunities within student housing. The team at HMO Property Designs specialises in HMOs for students and professionals, and we’ve crafted specific deals based on this experience.

Our investor-specific strategies maximise the chances of getting higher yields for the initial outlay. As we do the property searching, investors just need to complete the transaction with the vendor. At the same time, we sort out the reconfiguration and transformation of the property into the appropriate house, covering all the regulatory compliance and legal specifications.

We also provide fully vetted tenants who have already paid an initial deposit and can offer the services of our own property management company too. The idea is that our clients have access to a fully viable business that generates an income for them from day one.

Check out full details of the options we offer here for investing in student accommodation.

Leave a Comment