Tips on investing in student housing

Over the past ten years, student housing has become one of the most popular forms of property investment. According to Savills, approximately £5 billion worth of standing stock and development sites were sold in 2012 and 2013 and that number is expected to climb in 2014 and the years ahead.

Reasons for this include high yields and reliable tenancy. Spots in UK universities are highly sought after by international students, particularly from the Far East, and that demand will remain consistent regardless of economic circumstances. Estate agent Knight Frank recorded annual returns of 7.8 per cent in September 2013, and predicts similar returns in 2014.

Furthermore, student housing can be assured of government support, due to the role it could potentially play in alleviating the effects of the housing shortage. Greater availability of purpose-built student houses means less need for students to turn to private housing.

There’s plenty of incentive to invest in student housing, but what measures can be taken to ensure your investment is successful? You should always know your target market, so here are some answers to a few of the questions you may have about catering to students:

Is location important?

Location is important to students, but not in the way you think. Anything with good access to universities and public areas will suffice, regardless of whether it's considered to be an upmarket area. According to Sally Fraser of Stacks Property Search, “Students won't reject houses because they're on a busy road, or have a view of the gasworks; but they will reject them if they're difficult to get to, or cost more than the norm.”

So you know you have to look for accessible and affordable areas of the city, but which city? The latest Savills Student City Monitor pinpointed Bath, Brighton, Bristol, Cambridge, Cardiff, Edinburgh, London and Oxford as top spots for student houses, while Bournemouth, Glasgow, Manchester, Liverpool and Canterbury were also rated highly. The rankings were based on criteria such as demand, the rental market and the quality of universities.

What type of property should I invest in?

Students generally favour modern properties, with good access to Wi-Fi being a key asset. Investing in purpose-built student housing can take much of the administration burden off your shoulders, as there are usually companies in place that will assist in managing these properties and securing tenants.

If you plan to invest in HMOs (Houses in Multiple Occupation) – the term for private houses rented out to tenants who aren't part of the same household – you will need an HMO license. Bear in mind that this type of investment is being discouraged by the government and various councils, as the UK housing shortage and the popularity of HMOs means less options for families seeking homes.

Do I really want to chase binge-drinking students around demanding rent?

In most cases, your source of income lies not in the students themselves, but in their parents. Simply ensure that tenants have a guarantor in the form of a parent with a stable income, and make them your first point of contact if rent fails to arrive on time.

The Independent reports an “ever-growing number of wealthy international students”, and since most students will seek to secure accommodation before the start of the academic year, you can be assured of a consistent annual influx of tenants.

Clearly student housing represents a reliable - and highly profitable – form of investment, but it's not without its risks. So be sure to seek professional advice, and don't hesitate to contact us at Tepilo before you buy into student housing.

Disclaimer: The information and data provided are for general information purposes. They do not constitute investment advice nor can they take account of your own particular circumstances. If you require any advice on investments, you should contact a financial or other professional adviser.

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