If you have ever considered or wanted to know how to invest in student housing, look no further. Student housing continues to entice property investors year on year, and for good reason. We are going to share our top tips for investing in your own student property investment.
HMO vs Developer
The first thing to note is that there are two ways to invest in student housing, through your own HMO property or via a developer. We will run you through the benefits of both to assess which is right for you.
Choosing to invest in your own HMO property means you have an asset. You will have the benefit of owning a property that is likely to increase in value. You also have the opportunity to receive continued returns for many years going forward for as long as you own the property.
With an HMO, you also remain in full control of your investment. You take the insecurity out of investing with another party and you take full control and responsibility for your investment.
The drawback however is that purchasing a property outright is not an option for most. House prices in key areas for education average over £300,000.
When investing in student property through a developer, you can invest a far smaller amount, often as low as £25,000. If you have researched the investment opportunity and feel the company you intend to invest with are secure and legitimate, you may find this to be the preferable route.
Student property investments made through a developer are entirely hands off too. You may benefit by making several investments through a developer or broker, as this is easier and perhaps more viable.
Universities cannot match the demand in providing students with accommodation. Statistics published by UCAS highlight that there is an increase in UK students attending university in 2018 – proportionately up by 0.3%. In addition, there has been an increase in EU and international students, up 2% and 8% respectively from 2017.
Surprisingly, findings by the CIPD also shows that as an economy falls, the number of university applicants tends to rise.This is apparently due to a lack of job prospects and heightened competition for work. With over £5.8bn being invested in the market in 2017, this certainty of income is essential for investors.
Where to invest
The location for your property investment is hugely important. You have to identify an area with high demand for student property, but also a low level of supply to match it. Look at an area’s economy and the university itself in an attempt to gauge this.
In addition, you have to consider specific geographical location. Flats in the centre of cities will be dearer, but you may benefit from looking outside central areas if public transport is good. By investing in a property with close links to public transport, this will be a great selling point for the property, and may compensate for the reduced rent charged,increase profitable yield.
The success of the investment is down to the rooms being occupied. If the company has not marketed the property correctly or has failed to locate a high demand area, it may be unsuccessful, and you may not get the return you expected.
If you are investing in your own HMO, the property has to adhere to certain regulations. In short, the rooms have to be of a minimum size, and funding may be harder to acquire, with a phasing out of tax relief on mortgage interest.
It is important that additional cost implications are considered when investing in your own HMO. You must work out a realistic return on your investment to see if this is viable.
The market is booming as the number of students in the UK continue to rise. Demand has never been higher for student accommodation. Investing in student property could be one of the smartest things you can do in 2019, just be sure to do ample research before jumping in.