Understanding Student Accommodation Investment UK
Investing in student accommodation properties is becoming increasingly popular with many niche property investors looking to finance the development of these properties. While this investment typically provides a higher return than the usual buy-to-let-in opportunity, it also comes with some unique risks and downsides. Understanding the business model as well as its rewards and risks is crucial in making the best investment decisions.
How Does Student Accommodation Investment Work?
As the name implies, the investor will purchase choice properties for the particular purpose of turning them into comfortable living spaces for students.
The investor can secure funds in a solicitor account for the duration of the building development. This will protect the investor from losing funds. The account is setup in a way that payments are only released against Architect Certification which acknowledges that each stage of the property development is complete.
The investor’s costs will be taken into account when pricing each unit, and if the project is successful, the investor could look forward to a monthly payment within the range of 7-10% per year.
What are the Rewards of Student Accommodation Investment?
As highlighted above some of the rewards of student accommodation investment include:
• Higher return
• Investors funds are secure
• Guaranteed monthly income
• Stable market conditions
• Huge potential for growth
• Security of the UK property law
• Low entry level
What are the Risks of Student Accommodation Investment?
Although there are many benefits of student accommodation investment, there are some risks as well.
The site of the property is the most important aspect. A poor location can significantly affect how quickly the units will let out which will, in turn, affect profit. The closer the accommodation is to the university, the more attractive it will be to students.
2.) Miscalculation of Costs
Anyone who has ever been involved in building development knows how easy it is to miscalculate the costs and exceed your budget. To curtail this issue, use only experienced contractors for the project. Also, decide on a fixed amount with the contractor so that any miscalculations will be their responsibility.
3.) The Project Can Take Longer than Planned
This is also a prevalent issue due to external factors like weather. Using experienced individuals will reduce the chances of these inconveniences.
4.) Huge Competition
Unfortunately, the growing popularity of student accommodation investment can mean a huge competition. Newer buildings with better facilities, management services, or location will come up, and you will have to upgrade to beat the competition continues.
5.) Decline in Student Number
Although currents statistics favor an upward rise in student numbers in the following years, it has not always been so. The fact is a decline in students numbers will reduce demand for accommodation which will affect your projected profits.
While student housing investment produces higher than average returns as well as other benefits, these are some risks to consider before taking the big leap.