Student Property Investment

If you’re asking, “how do I invest in student property investment?” there are currently two main ways.

These two methods are by investing in an HMO, or by purchasing student accommodation investment opportunities.

We will take a look at both methods below:

What is an HMO?

Houses in multiple occupancies, abbreviated as HMOs, are properties where each room is rented to a different tenant.

Tenants usually share amenities, like kitchens and bathrooms, but separately pay rent.

Previously the most popular way to invest in student buy to let, HMOs have decreased in popularity for a variety of factors.

Firstly, HMOs can be tricky, especially for beginners.

With more tenants comes more potential wear and tear and more time spent managing the property.

Secondly, HMOs are becoming less common as they are subject to several laws.

In fact, many cities are trying to limit the rise of HMO conversions.

Pros:

More rental income – As there are more tenants, rent is typically higher, which means higher returns for investors.
Less chance of void periods – With more tenants, if one defaults on a payment, the others will likely be able to pay.

Cons:

Strict  legislation – Investors will need licenses to convert HMOs and have extra responsibilities to protect tenants as per The Licensing of Houses in Multiple Occupation Order 2018.
Hard to sell – As HMOs are exclusively investment properties, they will be more difficult to sell as only other investors will be interested.
Less demand – More and more students are opting for higher quality properties that HMOs can no longer provide.
Difficult to secure a mortgage – Student property investors will find it harder to secure mortgages compared to traditional buy to let property.
High maintenance costs – HMOs are typically subject to more wear and tear, with more tenants and older properties.

What is a Purpose-Built Student Accommodation?

Purpose-built student accommodation, or PBSA, is a type of student buy to let property that has been specifically designed for students.

This means they usually feature important facilities like high-speed Wi-fi, working spaces, on-site gyms, and building management.

PBSA has rapidly increased in recent years, with students now far more likely to opt for higher-quality modern living spaces.

This is why PBSA is perfect to cater for the modern student, as it has been exclusively built with their needs in mind.

Excitingly for investors, PBSA comes with property management teams, meaning investors can have a completely hands-off investment.

We will go into more detail about how to invest in student property in our dedicated guide. So, just click the link to read for free.

Pros:

More affordable – Student accommodation apartments are generally smaller, so are available at a much more affordable rate.
Higher returns – student accommodation rent can be incredibly high if a development has premium facilities. With high rent and low property, rental yields are generally far higher than normal residential property.
Consistent and predictable tenant cycle – Due to students needing accommodation in the academic year, you will generally see a predictable tenant cycle, so there’s less chance of nasty surprises like long void periods.
It can be a completely hands-off investment – Most student accommodation has its own attached management company, meaning investors will have no landlord duties.

Cons:

Less capital appreciation – student property investments generally offer far lower capital growth rates than traditional single buy to let property.
Limited to one tenant group – With purpose-built student accommodation, you will only be renting to students, which limits your tenant pool.