Buy-to-let property in particular remains a prized asset for many investors.
Student property has always been a popular buy-to-let option for savvy investors with houses of multiple occupation (HMOs) being snapped up in their thousands and landlords subsequently enjoying strong rental returns.
However, with student tenants proving to be quite time-consuming to manage many landlords have stepped back from the market, instead choosing less time-intensive investment assets.
This is until now when a new category of student housing has emerged – purpose-built student accommodation (PBSA) developments which have sprung up across the UK and caught the attention of investment professionals across the globe as a very lucrative and low-maintenance way of tapping into the student property market.
Total returns in the sector have outperformed all other traditional asset classes in the UK and that this has been the case since 2011. It is predicted that this will continue well into 2014 thanks to a maturing market and increasing student demand.
This demand has been created by a number of factors; a shortage of suitable accommodation, a natural decrease of the old housing stock and the movement of students away from traditional shared houses.
Student numbers in the UK are also being boosted by the growing number of international students flocking to the country. Knight Frank has predicted that these numbers will rise by 4% in the upcoming academic year, and the government has stated that they will continue to encourage this growth.
Purpose-built student property varies widely, from cluster rooms with shared kitchens to premium studios with private amenities and additional leisure facilities. Although more expensive to rent, these high-end developments are becoming more in-demand as students increasingly look for accommodation that will both support their studies and aid social interaction.
So what factors should you look-out for when considering student property?
- Location; Anything other than city centre is not worth your time as students care about a convenient location above all else.
- Quality; Today’s students want quality and security and they are willing to pay a premium for it, generating you higher yields in return.
- Lifestyle; You need a student service provider which is going to provide its tenants with the best possible experience.
- Price; A cheaper product may save you money in the short-term but it won’t be as popular with students, which jeopardises your stable income in the long-run.
An example of an accommodation provider that meets all these points is Vita Student and its products represent the very finest student residences on the market. Its developments are in established university cities such as Birmingham, Manchester, Exeter and Liverpool where there is a high density of students and a huge shortage of suitable accommodation.
This high-end student property is guaranteed to generate a steady income of 35% net over five years (7% per annum) – a much higher figure than you are likely to receive in the capital or indeed in the traditional property sector in general. The properties are also likely to appreciate in value by 6% every year which, when combined to the rental yield, means you could increase your initial capital by a total of 65% after just five years.
These developments are also ideal for investors who don’t want to spend time finding tenants or maintaining their properties as they are fully-managed by a dedicated management company.
Buy-to-let landlord breaks with tradition
Greg Hutchinson is a 65-year old retired management consultant currently living in Newbury, Berkshire. He has recently returned to the buy-to-let market as an investment route and decided to take advantage one of the most simple and hassle-free options available.
Greg explains: “I used to have a buy-to-let house in Newbury which I rented out successfully to young professionals for many years. I was making a good return on the investment but being a private landlord required a lot of time due to tenant enquiries and property maintenance so I decided to sell the property in 2008.
“Since then my money has mainly been in stocks and shares which has been profitable but I started to feel that my portfolio was too heavily weighted towards equity and I needed to find an alternative investment vehicle.”
Having successfully generated a high return on his previous buy-to-let purchase, his thoughts instinctively turned to the property market but he was determined to avoid the same hassle he had previously faced.
“One of the essential criterion for my new investment was that it had to be easy to manage – I am after all trying to enjoy my retirement. For this reason, Vita Student at Richmond House in Southampton seemed to be the ideal solution as all I needed to do was make the initial purchase and then sit back and enjoy the incoming rental returns.
“The strength of the UK’s higher education scene means that students are flocking to the country, greatly increasing the need for purpose-built accommodation in all our major cities and making it the perfect time to invest in the sector.”
This argument, combined with the fuss-free nature of the investment, sealed Greg’s decision and he quickly purchased three studios in Southampton which will each generate a 7% rental yield for five years.