Firstly, are there still opportunities in student property?

The answer is most definitely yes. In fact, with 3% extra stamp duty to pay and restricted tax allowances student property is likely to become more attractive to property investors. The extra yields that this kind of property investment offers means that the numbers are still likely to stack up so a good return can be made even if the property investment climate isn’t quite so favourable.

Also, the student loans system is actually good for landlords, not bad. Students can borrow relatively cheaply to finance their living costs now – and this enables them to afford (and even demand) better quality accommodation.

What’s important to know about investing in student property?

Investors need to bear in mind, however, that the student property market is different from in the past: With higher tuition fees it’s likely there’ll be lower student numbers in the future. (But certain universities are still heavily oversubscribed.)

Students are also increasingly demanding in terms of the quality of accommodation. Private investors also have increasingly competition in some areas from developers and operators of purpose built student accommodation blocks.

Here are the main advantages of investing in student property:

* Properties often located in cheaper areas to buy into, such as inner city locations.

* Almost guaranteed demand year in year out, if you’re in the right area and have the right property.

* Higher yields. Students typically pay significantly more rents than other tenants and property can be used more intensively. (Often yields are much more, possibly up to 20% for a well run shared student house.)

* Good prospects for price appreciation in future, especially if sold as a going concern in future.

Here are the main disadvantages of investing in student property:

* Higher levels of wear and tear possible than with a single family let.

* Careful and close management needed.

* Extra set-up, planning consent and licensing considerations if the property is likely to be considered a HMO or house in multiple occupancy. (Some but by no means all student accommodation is HMO.)

* Properties are often only occupied between September and June, with tenants paying either no rent or a reduced rent over the summer.

So how do you find the best opportunities in student property?

* Location is all. Places you should consider investing …. highly rated universities that are heavily oversubscribed.

Examples: Edinburgh. Manchester. Liverpool. Bristol. London. Leeds. Sheffield. Nottingham, Newcastle. Birmingham. Also, smaller locations which have large universities for their size and smallish property markets. Examples: Brighton, Exeter, Warwick, Cambridge, Oxford, Chester, Bath.

You may find that Pi report useful: 8 Student Property Investment Hotspots

* Check local demand. Letting agents who handle student property will tell you about supply and demand.

Always double check. In some cities, students are now favouring city centre locations where the university, nightlife and lots of other amenities are on the doorstep – rather than the traditional inner city student suburbs.

And very important …. several major city universities have or are relocating within their cities. Where a university relocates its main buildings this can also affect the local market.

Bear in mind that some universities are able to offer many students (especially first year students) a place in their own accommodation.

* Make extra checks in areas with lots of new, purpose built student accommodation, or PBSA as it is known. This can impact on demand for your property, although it is usually expensive in comparison with private student accommodation and does not appeal to all students.

* Choose the right sort of property. Students mostly want to share with several friends. Property with anything between three and six bedrooms is popular, and there is often also demand for property with 7-9 bedrooms too. (Check if you need a HMO licence.)

* Offer a good standard of property. Preferably large study bedrooms, a well appointed communal living area, ample bathroom accommodation. WiFi and good security is essential. The quality of tenants attracted and yields will be better.

* Consider targeting specialist areas of student demand. Postgraduate students, often pay more and seek accommodation outside of traditional local areas. Foreign students also tend to pay more, for accommodation that suits their requirements. Check how many foreign students your local universities have and/or are planning to enrol. Accommodation for students with partners and families is in limited supply and high demand in some areas.

Lastly, one important point to bear in mind when investing in student property is that student property is not in consistent demand at all times of year. For example, students often start looking for accommodation in the autumn for the following academic year. In order to avoid voids it is a good idea to plan your purchase of student property so that it will be available for letting when students are looking to rent. Again, it is advisable to check out the market with local experts.

The post The Pros & Cons Of Investing In Student Property first appeared on Property Insider.

The UK has a housing shortage – that much is common knowledge.

This is partly due to greater demand – with ever-increasing life expectancies and high immigration rates, the UK’s population is expected to break through the 70 million mark by mid-2027.

But this has also partly resulted from a political motivation to keep house prices high – therefore limiting supply. It has long been accepted by those in charge – from Macmillan, through Thatcher and to the modern day – that people tend to vote for the party that makes them feel the most prosperous.

It goes without saying that the major players in the residential construction industry too benefit from maintaining an undersupply of new properties on the market, profiting from the premium prices they can thus charge.

As a result of all this, the rate of home ownership fell to 64% in 2011 (ONS data) – down from 2001’s record high of 69%. The last time this figure dropped was back in 1918 – and it’s still going down.

Obviously, one consequence of this is an increased reliance on the rental sector, with the number of individuals renting property in the UK at its highest ever level.

And, hence the rise of the buy-to-let landlord – shrewd investors, who bought homes to rent out at ever-increasing levels.

So, why the collapse?

Simply speaking, it’s all become a little too much. Rents have escalated to unsustainable levels and opportunities for families or young professionals to own a home have begun to dwindle.

The mood in the UK has changed – from one of great pride in the housing industry to one of hopelessness. And finally, the government is beginning to take notice of the rumblings of discontent among millennials.

By clamping down on buy-to-let property ownership, the government hopes that it can free up more homes for local families and first-time buyers. And, their approach, in this respect, is quite simply to make it increasingly difficult for such landlords to make a worthwhile profit.

The new red tape

The direct action against the buy-to-let property sector began in anger back in 2015, with the off-setting of mortgage interest against tax.

This was then followed up by increased Stamp Duty Land Tax payments on all residential properties purchased (except a first home) in every price bracket later that same year.

A variety of tax adjustments – including a shift in the calculation of wear and tear allowance and an increase in capital gains tax on property sales – further added to the strain being felt by landlords.

And, the final nail in the coffin came with harsher new licensing laws for the establishment of Homes in Multiple Occupancy (HMOs), hugely reducing the pool of potential tenants for many landlords – and increasing the costs and hassle of others.

Additional mortgage lending criteria, including the inclusion of entire portfolios in the calculation of economic viability, has also compounded the aforementioned legislation.

What it all means in simple terms

The buy-to-let property sector’s honeymoon had already long passed, but these current efforts to curb it further have made the sector economically unviable in the majority of instances.

By way of example, a higher rate taxpayer with a £100,000 interest-only mortgage and a house returning a monthly rental income of £750, with £1,000 in annual costs, will have their NET profit reduced by 77% by mid-2020 (in comparison with mid-2016).

If this wasn’t bad enough, you also have to consider the amount of effort that such property investing requires and the fact that long-term profits are reliant on a range of external economic factors completely outside the investors’ control.

What alternatives are there for landlords?

There are certain property investment sectors that sit on the other side of the housing shortage issue.

Fundamentally, any accommodation type that funnels largely transient populations – students, tourists etc – from residential housing into purpose built alternatives is going to help to ensure that local families and professionals have more access to homes.

The best and most successful example of this currently is purpose built student accommodation.

Why purpose built student accommodation?

There are some core reasons why purpose built student accommodation, or PBSA, has been the UK’s highest yielding property sector since 2011 (Knight Frank):

1. The student population continues to rise – in 2016/17, we experienced the fourth consecutive year of record numbers
2. The numbers are destined to continue upwards – the UK has a hugely respected and incredibly well established university sector. Indeed, it’s the second most popular globally, both in terms of international students and highly ranked institutions
3. There is a critical undersupply of accommodation – Currently, only approximately 26% of students on average have access to PBSA
4. The UK government and local councils actively encourage it – such investments are Stamp Duty-exempt (up to £150,000), while many local councils are actively funnelling students into PBSA and away from the residential housing sector

Effortless nature of the investment

In addition to these core points, economies of scale also enable investors to receive their income while making minimal effort.

With 100+ units typically in a development, onsite management teams can be economically positioned onsite to take care of all operations.

This is another huge benefit when making a comparison with the buy-to-let property sector, where property management is either a huge time commitment or expense – or both.

Ability to invest from your armchair

Further to the effortless point, the vast majority of PBSA investors need never see the inside (or outside) of their property – indeed many don’t even step foot inside the UK.

Not only does this add more credence to the point about effortless income, but it also enables investors to select locations with the most potential for sustained high yields and capital growth.

James Harrington, Business Development Manager at UK student property specialists, Emerging Property, explained further – “Along with our partner developer, we handpick UK university towns and cities that fulfil our criteria in terms of thriving student populations and a critical undersupply of purpose built student housing.

“We then conduct extensive due diligence, studying a university’s recent investment levels and growth prospects, as well as a range of other factors, while selecting a development site within a prime close-to-campus location.

“In this way, we are able to ensure sustained high demand for our properties, as well as the sustained high yields that comes with that.”

He went on to add – “The vast majority of our property investors live outside the cities they invest in, with only a very small percentage choosing to visit the property for themselves.”

What about the figures?

Purpose built student accommodation investments have an entry level of around £45,000, while yields can go as high as 10% NET.

Some developers even provide fixed income terms, with the most favourable being as long as 10 years – meaning that your annual income is predetermined, contracted and fixed in place for a decade.

Investment levels have been increasing throughout the last decade, with the market overtaking the US student sector for the first time in 2015, and this trend looks set to continue.

Even for those willing to slog it out in the buy-to-let property sector, purpose built student accommodation is increasingly becoming a key component of any investment portfolio.

Guest post provided by Emerging Property

The post Is the end nigh for conventional buy to let investing? first appeared on Property Insider.