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Student Property

Types Of Student Accommodation

It’s useful to break student accommodation down into 4 main types:

House Of Multiple Occupation (HMO)

An HMO property typically consists of three or more people from separate households living together and sharing communal areas, such as bathrooms and kitchens. These are usually former residential houses that have been converted to maximise the number of bedrooms. HMO properties are let on a room-by-room basis and rent is often inclusive of bills allowing the tenant to receive an all-encompassing and hassle-free, upfront cost.

Purpose-Built Student Accommodation (PBSA)

Whether built from the ground up or converted from larger premises, these blocks typically house anything from around 50 to 500+ bedrooms formed of either studios, single ensuite rooms or cluster flats, and often provide a range of lifestyle facilities onsite such as laundry services, gyms, cinemas, concierge and cleaners. PBSA blocks are also very attractive to overseas students because they usually offer all-inclusive packages, including bills and on-site security. This provides a much easier, seamless and hassle-free experience for those who are starting a life in a new country without the help of their family. Similarly, this can also be an attractive option for post-graduate students.

Single Apartments And Pods In PBSA Blocks

These are often sold off plan during the construction of PBSA to fund developer costs and normally come with a rental guarantee period.

Single Apartments In Residential Blocks

These can be repurposed to rent to students, normally without planning permission if they are for two students or less.

Is Student Property A Good Investment?

In 2019, the student accommodation market was valued at £53bn a year, with a prediction of 3% annual growth and increasing demand. Far from the elitist privilege of years gone by, attending university and seeking higher education is quite the norm. Between 2018 and 2019 there were over 2.3 million students across the UK, making investing in student accommodation a lucrative venture and one that benefits from future demand. Despite the uncertainty of the pandemic in 2020, the number of students has continued to increase with a record of 40.5% of 18-year-olds applying to university. Many universities across the UK are oversubscribed and as a result, the demand for accommodation continues to increase due to larger student populations. High levels of demand ensure a constant stream of both tenants and rental income for those who invest.

Typically these run from 1st July to 30th June creating a very predictable lettings cycle, minimising the chance of void periods, and virtually ruling out the need to ever evict tenants.

Typically more than six months in advance which gives landlords a lot of security, high visibility on lettings status and ample scope to manage future performance.

This provides a high degree of income security, drastically minimising rental defaults and the consequent need for expensive court action.

This simplifies and lowers the cost of the lettings process significantly compared to letting on a room by room basis. It also offers another layer of income protection in that all tenants are jointly liable for ensuring all rent is paid.

Whether monthly or quarterly, and in the case of some PBSAs, up front for the year by many international students, this provides significant cash flow benefits for landlords.

This is especially true for properties finished to a very good standard as students are an ever more demanding and discerning consumer and willing to pay higher rents for superior accommodation.

Student landlords are never asked to contribute to this cost, and aren’t susceptible to adverse and costly changes in regulation (e.g. backdated tax banding of each separate room).

The Article 4 Direction restricts the creation of new HMOs in popular student areas. This effectively reduces competition while boosting likely annual increases in a property’s value. Read more about the implications of Article 4 Direction here.

Whilst not all student accommodation is the same, it is possible to talk in general terms about some of the distinctly advantageous features of investing in this asset class have been discussed above.

How Can accumul8 Help You?

For more advice on student property investment or for information on our services, please contact us on 0330 111 0888 or at hi@growwithus.today. We are more than happy to help and we look forward to hearing from you!

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