There’s more than one way to build a property portfolio. Most investors focus on single let homes, which offer stability. However, an increasing number of landlords are choosing to focus on student accommodations, which, while requiring careful management, offer a significant range of advantages.
In this post, we’re going to take a closer look at student accommodation and why, to certain investors, they’re proving to be the best property investment type on the market.
More People Than Ever Are Going to University
If you went to university a decade or more ago, then you might assume that the number of people going to university has declined. After all, back in the 1990s, 2000s, and 2010s, it felt like everyone was going to university.
This trend has continued. There are more people than ever going to university in the UK, and that’s expected to continue for the rest of the decade and beyond. Not only is going to university becoming the outright norm, but there’s also been a demographic boom that means that there are more eighteen year olds — those most likely to go to university — than ever before.
Of course, not everyone who enrolls in university moves away from home and thus requires student accommodation, but the vast majority do. The latest research indicates that nearly 70% of people who are going to university plan to move away, which means there’s a large demand for housing.
It Offers High Rental Yields
Want to get as much bang for your buck as possible from your property investment? Then there’s arguably no better way than by investing in student accommodation, which can offer significantly higher yields than traditional single let homes.
The reason? When you rent a single let home, you’re renting the whole house. When you rent out student accommodation, you’re usually renting out rooms, with each occupant paying for the room they occupy. Research suggests that yields for these types of properties can be around 8 – 12%, which is significantly more than the 4 – 8% you typically get from single let homes.
Managing Student Accommodation is Easier Than Ever
One of the reasons why property investors have historically shied away from investing in student accommodation is that it was thought to be a lot more challenging than other types of property investments.
And that view wasn’t entirely incorrect. In the past, it was more difficult to rent out multiple rooms in a single property to multiple different tenants. But times have changed. Today, many property investors choose to simply let a student property management company handle all the essential tasks, including advertising the property, selecting tenants, collecting rent, and managing maintenance. That means investors can get all the benefits of investing in student accommodation, without having to be in charge of all the headache-inducing responsibilities.
There Are Predictable Letting Patterns
Many people assume that investing in family households is more reliable, but there are some areas in which student accommodation has the edge. When you invest in single family homes, you’re at the mercy of the schedule of those particular tenants. If they decide to move away, then you may be left without tenants for a while, especially if it’s during a slow period of the year.
Student accommodation is different. While tenants don’t stay forever, you’ll at least know when they’ll be leaving, since it’ll be tied to the academic year. And right at the time that they’re leaving, they’ll be a new crop of students who are ready to take their place.
It Allows for a Speciality Focus
One of the problems that property investors encounter is that they’re not always entirely sure who they’re trying to target, and that can make choosing decor and amenities for the property a challenge.
When you choose to focus on student accommodation, you essentially already know who you’re trying to reach, and that allows you to research what they want and ensure that your property has them. For example, UK students typically look for student accommodations that have the following features:
- Rapid-fast WiFi
- Double beds
- Good location
- All-inclusive bills
- Social areas.
The Rise of PBSA Developments Has Had Minimal Impact
Some investors have been wary of investing in student accommodation because of the rise of Purpose Built Student Accommodation (PBSA). Go into any city that has a major university, and you’ll often find huge accommodations that are specifically for students — and that can make investors nervous that supply outstrips demand.
But there are two things to say about this. The first is that there was a shortage of student housing anyway, so these PBSAs were really just making the market more manageable. The second is that even if there were ten large PBSA in a zone, it would still be more than possible to rent out student accommodation. The reason? Student houses are cheaper (those PBSA rents are surprisingly high) and — this is crucial — many students don’t want to live in them anyway, especially beyond first year.
It’s Often Possible to Pivot Later On
Another advantage about investing in student accommodation is that even if you want to pivot to a different market later on, that’s usually possible. Many student homes are located in areas that are desirable for all types of renters, including professionals and families, since they tend to be near to where the action is. You might rent out to students for years, and then decide to make a change.
It’s Resilient
Finally, one of the best reasons to invest in student accommodation is that the market is remarkably resilient. People will always go to university, and even during times when other rental markets have suffered in the past, the student housing market remained strong. With the number of people going to university increasing at levels that outstretch general population growth, it’s really not an exaggeration to say that there will nearly always be a demand for quality student accommodations that have a good location — and that’s really something that you can’t say about other forms of property investment.