Many investors have thought of investing in student accommodation in UK sometime. While it may sound very attractive with low entry costs and high rental yields, this niche investment also has its fair share of drawbacks that must be taken into account.
Do you like the sound of income returns above average? What happens with a positive investment of cash flow? Or better yet, a low purchase price? It sounds great, does not it? These are just some of the benefits that are often said of investing in student accommodation. But unfortunately, in our experience, it is usually where the good news stops.
Investing in student accommodation in UK has its fair share of the disadvantages that must be carefully weighed against the potential benefits before embarking on this route.
Student tenants often require additional security, life supplies (cutlery, sheets, etc.) and full furniture. In addition to this, the greater wear of the rent to the students can mean a more frequent replacement of furniture and articles for the home and an increase in the maintenance costs. Property management fees are also more expensive due to the need to manage multiple individual tenants (in cases where many people share a property).
Increase in turnover and vacancies
Be prepared to accept a constant rotation of short-term leases and potentially have the property vacant during the year-end vacation period when many foreign students return home. Some tenants may continue to rent during this period, but tenant conflicts within the unique property and nostalgia are common problems that will see a greater turnover of tenants independently.
Multiple tenants in a property mean multiple leases that are quite annoying in and of themselves. In addition, student tenants are notoriously late in paying rent, so tenants are expected to do so regularly. These tenants also cannot take care of the property or say to a young couple or family, so maintenance and cleaning will be a major problem. You should also investigate if a normal insurance policy will be sufficient and some tips may have several requirements for properties with several individual leases. You may also have difficulty getting the right loan.
Particular student accommodations to avoid most are specially designed ones, many of which are sold off-plan by developers or sold to investors as integral “packages” where everything is taken care of for you.
In general, there are people on both sides of the fence when discussing whether buying student accommodation is a good investment. While it has some advantages and may work well for some investors, in general, this niche investment is risky and often does not pay off in the long term, especially for those who invest in specially designed student accommodation.