The UK is one of the greatest places to study in the world, and at any one time the country has around 3 million students in higher education, spanning over 160 universities and technical colleges. The numbers of students pursuing higher education is growing year-on-year, which in the property sector is causing increasing demand for PBSA (Purpose Built Student Accommodation) properties.

Investors are taking advantage of this growing demand to expand their portfolio and benefit hugely from the lucrative opportunities present in the PBSA sector. Student property investment has existed for many years, but the demands have shifted – with PBSA now offering accommodation with amenities such as common areas, cafes, rooftop gardens, work facilities and on-site gyms. As such, rental income is considerably higher than traditional student accommodation and so investors have more to gain.

Why Student Rentals are a Strong Investment Option

Student property requires an extra 3% stamp duty and there are some tax limitations, but it remains a strong prospect even with these in place. The property investment climate changes all the time, but the extra yields offered by student property makes it a prosperous choice.

With many domestic students funded by the student loans system, they’re able to borrow further money at reasonable rates to cover living costs and so in turn demand for high quality accommodation is rising. Furthermore, universities remain heavily over-subscribed and the boom in the sector has seen the establishment of dedicated PBSA developers and operators – further proving the potential at stake.

Even with a cost-of-living crisis, demand for higher education remains an upward trend and so investors can rest assured of a good return no matter the socio-economic climate.

The Pack Horse – Bolton Student Accommodation

Forshaw Groups Investment Opportunity at The Pack Horse in Bolton includes:

• Typical yields of 10% assured NET for first year
• Recession-proof investment in student accommodation
• Central location and near excellent transport links
• Turn-key hassle free investment opportunity
• Fully managed by a company with a proven track record
• Recognised and proven student rental management team

What to look for in a Student Rental Property

There are a number of considerations for investors to make when finding the right student property to invest in. These include:

• Location – student properties are usually best situated within walking distance of either the local campus and/or local amenities, or well connected with public transport.
• Property layout and size – properties will need enough bathrooms and toilets to cover all tenants, with large communal areas often favoured.
• Condition – properties should be free of any hazards. Student properties are subject to high levels of wear and tear and so any property with existing issues is likely to have these exacerbated quickly.
• Rental yields – researching into local rental yields allows the potential profitability of an investment to be assessed.

Financial Aspects of Student Buy-To-Let Investment

There are several financial aspects of student property investment that investors must properly understand before they invest for the first time. These include:

1. How to Finance your Student Buy-To-Let Property
   In the UK there currently aren’t specific student buy-to-let mortgages, but standard buy-to-let mortgages are offered by lenders who support student accommodation. This said, those who don’t already have experience with HMO management may find it difficult to obtain such a mortgage, as they are considered high risk due to the nature of their tenants.
   
   Anyone who meets the lending criteria of a buy-to-let mortgage provider offering this kind of product can obtain one.
   
   
2. Understanding Rental Yields and ROI (Return on Investment)
   Rental yields are a fantastic indication of the ROI that an investor could expect to see. It’s critical that investors understand the difference between gross rental yield (comparing the property price to the income generated without factoring in expenses) and net rental yield (comparing the property price to the income generated factoring in all costs). A higher yield is a better return.
   
   Furthermore, mortgage lenders for student property will take into account the potential ROI on the investment when it comes to making their lending decisions.
   
   
3. Tax Considerations and Costs for Student Landlords
   Tax considerations for student property landlords are slightly different to those of traditional buy-to-let properties and so the technicalities must be understood.
   
   Income generated from student lets is subject to income tax, and the wear-and-tear allowance that landlords used to be able to claim has been abolished. Now, exact costs can be claimed but there is no blanket allowance amount available.
   
   When a property is sold, landlords often look to claim Private Residence Relief to reduce their Capital Gains Tax liability – but investors should note that this does not apply to student properties.

The Court House – Plymouth Student Accommodation

Forshaw Groups Investment Opportunity at The Court House in Plymouth includes:

• Typical yields of 9% assured NET for 2 years
• Built by an experienced developer in the student accommodation market
• Located in an area with high rental demand
• On-site lettings and management office (Primo Property Management)
• Brand name supermarket built next door

Overview

Student rentals are an increasingly popular option for investors with the sector blooming and growing all the time. With high rental yields and increasingly rising demand, both traditional student HMOs and new PBSA developments can be prosperous for those brave enough to take the leap.

Forshaw Land & Property Group can help guide investors through this blossoming investment sector and ensure maximum ROI is achieved.

To find out more about the student buy-to-let investments around the UK please contact us directly by calling +44 (0)1204 299 229 or filling out the form below: