When faced with a decision between residential and student property, the majority of investors would shun any opportunity to take on a student investment. However, with student tenants changing and several benefits to be reaped, purpose-built student developments are rising in popularity amongst reconsidering landlords.
There’s an unfair misconception that students are noisy and messy big drinkers who don’t pay their rents on time. Well, this couldn’t be more untrue for the sophisticated 21st-century soon to be graduates who are committed to studying hard and desire to live in luxury, privately-rented residences. The purpose-built industry is on target to be worth a record-breaking £4.7 billion by 2019 as it continues to supply top university cities with supreme student accommodation featuring onsite gyms, games rooms, work hubs, cafés, gardens and even cinemas in a bid to change the ideas surrounding student property investments.
The truth is, luxury properties attract luxury tenants. A new-era of students are prepared to pay higher rents on time to secure the best living accommodation in their city of study. In fact, students not paying rent is an exaggerated issue, with less than 1% of students genuinely falling behind on rent payments. Many students are also working alongside their degree, with a consistent source of income. Try not to allow a small number of cases to taint your whole perception of student property. Although, to add to investor security, new builds being tailored exclusively for the student tenant are more often than not fully managed and experienced companies collect regular rents so that investors don’t have to worry about receiving their rental income on time.
Another pull for investors is the pouring in of overseas students into UK hotspot areas such as Liverpool and Manchester where university rankings are high and international communities are well established. Foreign students, especially from the Asian continent, are sent over to study in the UK by wealthy parents who send all their money over to cover the rents. This is just one instance of how the nature of our student population is evolving away from the stained ideals of the past.
With this transformation, a shift from university owned halls which attract rowdy undergraduates to purpose-built and private developments appealing to postgrads has been evidenced. Flat-screen TVs, double beds and opulent furnishings are designed to the tastes of more mature residents working for Masters and PHD degrees who are likely to snap up premium apartments close to campus. These types of students prove far more desirable for landlords.
Making the switch from residential to student property could mean investors will get higher yields, with certainty and confidence surrounding the student population working positively against a lack of property stock. RW Invest are a prime example of a buy to let investment company working with developers of student property who assure 8% rental returns for as high as five years – deals which aren’t easy to come by in the buy to let property market.
Another advantage is that landlords can get relief on stamp duty charges when investing in student properties. Units under £125,000 will owe 0% of the tax. This means that a trendy studio apartment priced at £100,000 would cost a residential investor an added 3% on top of the price of the property (around £3,000 extra), whereas this can be avoided entirely on a student unit of the same cost. Investors could even purchase two student units and still not have to pay stamp duty tax with competitive prices on property available particularly in northern cities saving investors thousands.