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Checklist for successful investing in purpose-built student accommodation

One Touch Property have created a checklist to support those looking to invest in purpose-built student accommodation (PBSA).

1. Location

Developments in certain areas fare better than others when it comes to investing in purpose-built student accommodation.

For example, a house in a leafy suburb probably wouldn’t do as well as a city centre apartment or room. Students’ requirements are ever-changing, and while several years ago they may have been content in a shared house away from town, they now want to live centrally with easy access to the city’s nightlife and university campuses.

Similarly, purchasing accommodation in a smaller town with a couple thousand students will not generate a massive income. There will not be much demand if there are too few students or if there are indicators in cities. To make sure your student accommodation investment stacks up, you’ll need to consider the number of students, amount of existing accommodation developments (including their location, amenities etc) and how many new developments are in the pipeline. Additionally, you’ll need to research the scope for attracting new students.

2. Consider when the housing will be completed

If the student accommodation is a new development, you will need to consider its completion date. Students start university in September and will want to move into their accommodation at that time. If the development is not ready, it’s less likely to be filled, and you will be looking at several months without any rental income as students are generally on year-long tenancies and will not consider moving midway through.

3. Consider the type of accommodation you’re investing in

There are many different types of student accommodation, from HMOs to student pods and apartments which fall under the category of purpose-built student accommodation.

HMOs were typically popular with students who wanted cheap accommodation and were not concerned about location. Since HMO licensing reforms, it has become a less attractive option and purpose-built student accommodation has come to the forefront. It is popular with investors as the management company deals with the upkeep of the building and landlords will face fewer licensing restrictions.

4. Do you have the capital required?

Student housing typically has a lower entry rate compared to regular buy to lets. There are some drawbacks with this kind of investment though, as the size of units in purpose-built student accommodation blocks and their commercial nature means most lenders will not be prepared to offer mortgages on them. Ensure you have the full amount in cash for the unit you’re investing in, or that you will have the full amount within the timescale specified if the developer offers a flexible payment plan.

5. What are you hoping to achieve from investing in student accommodation?

Are you looking to achieve high yields or good levels of capital growth from investing in student accommodation? 

Purpose-built student accommodation is not intended to be an investment that achieves high levels of capital growth. Its attractiveness is underpinned by the demand and the rental yields that can be achieved, alongside its low maintenance nature – as a management company will maintain the pod or apartment. It’s important to consider that you’re not likely to get much of an uplift when it comes to reselling the unit.

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