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UK Student Property Investment, The Educated Choice

7th April 2014

UK Student Property Investment

Why purchasing high yielding student investments through Fresh Invest is the educated choice to make.

We have been operating in the UK student property investment market for a number of years now with projects nationwide. In the time we have been in this market, we have seen student investments of all shapes and sizes, offering yields from 8% up to 12% NET and guaranteed for anywhere up to 10 years! The investments are normally sold as either student pods, studios or HMO houses, new build or refurbishment. Here are some potential pitfalls to look out for:

  • Over-valued property
  • Unachievable rental prices
  • Large deposits through build schedule with little security
  • Pigeon holed property (only ever usable as student property)
  • Incomplete information (are rents inclusive of bills?)
  • Is the area popular with students?

Since the inception of the student pod, the market has been filled by a lot of developers looking to make a quick buck here and there. Offering products which, when investigated properly, do not stack up from a yield or a price perspective. The biggest thing to look out for is to see if the price has been “loaded” in order to pay back a guaranteed return. The easiest way to check this is to use comparables to compare the quoted rental prices, you may well notice that the prices quoted in sales literature are not going to be achievable, those prices are used to get you to pay more for the property up front, they can then be fed back in a guaranteed rental period. Once the guarantee period finishes, you are likely to be left with an over-valued, underperforming asset.

We don’t think student pods should be completely negated. We believe that there will always be a large number of students that like to live in this type of accommodation. It is social and gives students their own space, which is important. However, student pods are not our preferred method of investment in this market and the largest reason for this comes down to resaleability. Although resales are possible, the market is restricted purely to investors and the price will always be subject to the rental potential of the unit.

Our preferred method of student investment is with HMO’s, student cluster flats or studio apartments. These 3 types of investment give the increased flexibility of a property that can be sold to the owner-occupier market, if for any reason you ever struggled to attract student rentals. Another advantage of this type of investment is that the properties are all a mortgageable product, meaning you can leverage your funds to achieve returns in excess of 20%

Our last student project was a fantastic success with 9 x 6 bed HMO’s in Liverpool, all sold off-plan within 2 months of marketing. All of the properties were rented for completion with 100% occupancy at the quoted rental prices, giving NET yields of around 10%. All of the properties on this development are 100% occupied for the 2014/15 academic year too!

Our Next Investment

For our next student investment, we are partnered with the same developer as the last, who has a good track record in delivering projects on time and to a great specification. We will be building 27 x HMO properties in Liverpool, with deposits of 35% put down through the build schedule and only released upon particular stages of construction, signed off by an independent architect. Yields will be 10% NET after all costs and because this will again be a mortgageable property, we expect cash on cash returns around 20%

For more details of this and future property investments, register here https://www.freshinvest.co.uk/investors_registration/

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