Why Investing in Student Halls of Residence is Popular
Most investors are aware that rental properties in the UK are among the best performing asset classes currently and within property those being rented by students are the best performers.
Alongside this interest has been unprecedented growth in the opportunities for student accommodation – especially for investors of student halls of residence – as investors look for regular rental income and diversification.
One of the big drivers for the growth in interest is that there are now more students; numbers rocketed between 2004 and 2013 by 40%.
In addition, the numbers of students from abroad increased by 56% in the same period.
Universities don’t have enough halls of residence
However, one of the big issues is that universities do not own enough of their own accommodation to provide living space for their students.
According to the real estate firm Knight Frank, only 26% of students in university towns manage to find space in a hall of residence.
This means that there is enormous demand for developers and property companies to build private residential halls for students.
Another big driver for the growth in private student halls is the fact that students today are demanding that their accommodation is of high-quality – forget the traditional image of grotty student bedsits, student accommodation today is modern, new and comfortable.
Quality private halls of residence will bring higher returns
Students are also looking for more flexible tenancies, a comfortable environment to live in and one bill that covers the rent and bills.
In return, those investing in a private halls of residence can look forward to student tenants keen to pay a premium for the right accommodation.
The Knight Frank study also found that students would be willing to pay up to 75% more for a private student halls of residence than they would for renting a private property.
It’s this willingness which has underpinned returns on student accommodation investment of around 8% and 9% a year.
Criteria for student halls of residence
The key for successful private halls of residence investment is to research carefully which university towns have the most demand but low supply and opt for a property close to the campus.
The student’s halls should also be close to bars and shops as well as public transport to get them to their studies.
Investors should also think about the quality of the university – opt for a top ranking university and demand will be stronger, especially from overseas students.
It’s also wise to ensure that the management company running the student accommodation has the experience and skills to make it a success. This means having to create a ‘brand’ for the private student halls to help attract tenants and ensure occupation rates are high.
The management company will also need to collect rents and deal with any issues that occur and this will mean a sound long-term investment will generate the required returns.
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