Start Investing in Student Real Estate Using These 5 Simple Steps

22nd Feb 2023

Student real estate is big business.

Investing in properties that have been bought to rent exclusively to student tenants can have some high returns and be a rewarding experience in one of the fastest-growing sectors in the UK.

According to a recent national student survey, around 88% of UK university students live in student accommodation, so there’s lots of scope for getting your foot on the student property ladder. Students can also bring in higher rental yields when compared to other types of renters.

So read on to find out how to start investing in student real estate using these 5 simple steps.

1.     Select the Type of Student Property

When you think of student accommodation you might think of a poky, dingy, unappealing space. Think again.

Many students these days expect a higher-quality living experience such as premium student buy-to-let properties. Typically, once students have completed their first year living in halls of residence, they move into private housing.

Student housing might come in the form of purpose-built student accommodation (PBSA), or houses of multiple occupation (HMO).

If you’re looking to become a student property landlord, you need to know which type of student accommodation you will invest in.

PBSA properties are designed specifically as private accommodation for students, in shared flats or studios. Special amenities like common rooms, study rooms, kitchens, and even luxuries like cinemas and gyms can be a real pull for prospective students.

The other kind of student accommodation, HMOs, are properties where each room is rented separately to individual tenants, who share communal amenities like kitchens and bathrooms. When you invest in these properties, you must adhere to some strict legal health and safety requirements and provide multiple plug points, high-quality furnishings, and an overall clean and inviting finish.

HMOs are a good investment because many university students prefer to live in larger groups and, as there are multiple tenants, there is less chance of a void period occurring. That is, other tenants are at hand to pay any rent owed if one defaults on payment.

Multiple occupancy homes also generally give a higher monthly rental yield and benefit greatly from property management.

Next up on our guide to how to start investing in student real estate using these 5 simple steps….

2.    Choose a Location

When it comes to choosing the student property, the location should be of utmost importance to you.

The UK is home to many university towns and cities, and those places automatically guarantee an influx of potential tenants. So when you are looking for properties to invest in, check the following:

  • Does the town or city have high-quality universities?
  • Are there attractive employment opportunities?
  • What is the graduation retention rate in the town or city?
  • What nightlife is there in the town or city?
  • Is the property located near to the university campuses, in the city centre, or in student-centric areas?
  • What is the demand like in those areas?

Some students prefer to be close to other student houses, whereas others prioritise proximity to the campus. If you choose your property location wisely, your investment will be in higher demand, making it a better long-term investment.

Some of the most popular student cities include Manchester, Leeds, Newcastle, Edinburgh, Liverpool, Sheffield, and Nottingham. Amongst the top university towns is St Andrew’s, where Prince William studied and met fellow alumni Kate Middleton.

3.    Do Your Research

There are currently around 177,000 HMOs in England, and if you are new to this type of investment, it’s best to do your research.

You don’t want to leave any stone unturned as there are legal requirements involved, such as room sizes, obtaining an HMO licence and putting fire safety measures in place.

Take a look at this HMO checklist for student landlords, to give you an insight into what to expect.

You should also bear in mind that if you’re buying a second home or a buy-to-let, you’ll have to pay a 3% additional rate of stamp duty.

Buy-to-let properties also have long-term implications in terms of capital gains tax and inheritance tax. If in doubt, talk to a real estate professional.

4.   Choose a Student Housing Advisor

Official paperwork and big decision-making may seem a little daunting.

One great way to lighten the load is to find a student accommodation investment advisor. Their expertise of the market and ins and outs of how to achieve your personal investment objectives will be invaluable throughout the process.

5.    Be Clear About Student Responsibilities

Once you’re set up with the location, and property and have done all your research with the help of your real estate advisor, there’s only one last thing to do.

The final point in our guide to how to start investing in student real estate using these 5 simple steps is…laying down ground rules with your student tenants.

That means informing your tenants about the basics of living in and taking care of the property - how to work the thermostat, what to do if the boiler breaks, rubbish collection days, fire safety drills and so on…

It might also be a good idea to appoint a lead tenant among the students- they will be the main point of contact for rent collection or for any issue that may arise.

Before signing the tenancy agreement, go through the rules, terms and conditions, and clearly explain any important points to remember.

You also need to lay down some do’s and don’ts for house parties, and sort out the security deposit and guarantors.

When becoming a student landlord, there’s plenty to consider, but it’s a potentially lucrative opportunity with growing demand. If you’d like to know more about how to start investing in student real estate using these 5 simple steps and beyond, contact us at Thornley Groves today.