By no means an exhaustive list, here are some of the most frequently asked questions that we receive from interested parties about investing in Purpose-Built Student Accommodation (PBSA) :
Why invest in Student Accommodation?
Up until only a few years ago, only financial institutions and major investors could afford to invest in Student Property but since developers are now selling individual units within their new development projects, rather than the whole development itself, the asset class of PBSA has become an attractive proposition for the smaller investor.
Even during recent financial upheavals effecting the UK property markets, where some property saw a decrease in values and rental incomes, PBSA consistently provided capital growth and high rental income.
High demand for and a critical under-supply of PBSA means that investing in the student property market is a sustainable and lucrative choice for savvy investors, a fact reflected in some £9 Billion invested in the purchase of PBSA properties over the last two years alone.
Who invests in student accommodation ?
Over 80% of investment in PBSA comes from overseas capital, the remainder from UK financial institutions (pension funds, insurance companies and investment banks) and from portfolio investors (experienced buy-to-let landlords) and private individuals who are looking to take advantage of the high income returns and long term capital growth from the sector. You can see more about this in our article here “who buys purpose built student accommodation”
How does investing in Student Property differ from buy-to-let property ?
PBSA typically gets a higher rate of return when compared to the average buy to let property purchase. PBSA is a fully managed investment whereas buy to let involves much work maintaining property, finding tenants, collecting rents and so on. With PBSA it is like investing in a Property Fund from an Insurance company … once you have made your investment, there are no further requirements for you to do anything or to spend any more money, you simply receive the income from your investment along with any capital growth as the property value increases over time.
Is Student Accommodation more expensive than other Buy To Let property ?
No. With PBSA you are normally buying highly desirable, fully furnished accommodation that can only be let to students, whereas with a typical buy to let you are typically buying an entire house or apartment and are not restricted to who can let the property.
What are the different types of student accommodation available to buy?
There are three types : (1) Student Pods are bedrooms similar to university halls of residence, with a bed, storage (cupboards and drawers) and a study area (desk). They will have shared facilities such as bathrooms, kitchens, lounges and sometimes gyms and recreation rooms. Some student pods come en-suite and then there are the more luxurious (2) Studio Apartments which all have their own bathroom and often have their own kitchen or cooking area too. Finally there are (3) Student Rooms available in private HMOs (homes with multiple occupancy)
Can I get a mortgage to buy student property ?
For HMOs (Homes with Multiple Occupancy) the answer is generally yes, depending on a number of factors like how many rooms there are. For PBSA, where you are buying a single unit alongside multiple other investors doing the same, the answer is generally no. That is not to say that you cannot raise finance via other means : for more details on lending for the purchase of Student Property, you can see our article here “Can I get a mortgage on student accommodationproperty ?”
Is my investment as “safe as houses” ?
There is no evidence to suggest that your investment will not be as safe as investing in any other type of UK property and as with other conveyances, the property transfer will be enacted by a (law society registered) UK solicitor.
Apart from the initial investment, are there any additional costs or burdens ?
No. Unlike traditional buy to let landlords, you wont have to find tenants, collect rent, insure the property or maintain it as the developer has appointed a managing agent to take care of everything. All you have to do is decide what to spend the rental income on, that’s it.
Do the student investment properties have their own kitchens ?
Some do, some don’t but it rarely seems to make a difference on the ROI for rental income or property resale values.
What if I wish to sell my student property investment ?
Like with any property in the UK, you have the right to do this at any time and in the same manner : either advertise it yourself or get a (specialist) sales agent like ourselves to market it for you. Some developers offer a guaranteed buy-back option for or after a certain period of ownership, example here (again, check the details of the property investment that you are considering).
Is the rent guaranteed ?
If it is clearly stated in the developers offer that the rental income is assured and or that returns are guaranteed at a fixed rate, then yes, the rental income that you will receive is guaranteed for the term stated, regardless of occupancy. Upon purchase, your legal representative will confirm this prior to exchange of contracts.
I am ready to buy a property, what happens next ?
Contact us and we’ll guide you through the process for your preferred investment property if you have one OR we can discuss which of the available property investments would best suit your circumstances.
Although each developer has its own procedure for selling a property, in general the rules is that you will pay a small holding deposit to begin with (anything from £500 to 10% of the property price) followed by another payment to bring the total up to 50% of the purchase price a month to three months later, followed by a final payment of the balance of the agreed price when the build is complete.
Most of our developers pay a significant rate of interest on your deposit funds up until the build is complete, so you should still receive a far greater return (typically 4% to 6% pa) than you would when compared to leaving your money in (say) a building society deposit account.
In order to proceed with any purchase you will need to present satisfactory identification in order for legal representation and property transfer to occur. A photo I.D. such as a valid passport or photo driving licence will suffice, along with proof of address such a copy of a recent bank statement, mortgage statement or utility bill
Can I use my own solicitor ?
Most developers have a solicitor that they are happy to recommend who are experienced in dealing with this sort of transaction and have dealt with the developer over several transactions already. So their recommended solicitor will likely perform the task faster and cheaper than your own choice of solicitor could but yes, if you wish to use your own solicitor, that is up to you.
Where developers are offering to pay legal fees for the transfer of property, this offer will normally only apply when you use their recommended solicitor. You should ask your solicitor for a summary of their costs prior to instruction but in general, you can expect to pay around £500 to £1,000.
Can I buy more than one PBSA unit ?
Yes, in fact many of our clients are portfolio buyers, purchasing several units at once. If you are new to PBSA and are considering ‘dipping your toe in the water’ then that’s fine too, we welcome all new clients regardless of investment level as the majority of our single unit purchasers come back for more!
I have another question not listed here
Please contact us and we’ll try to answer any questions you might have.