Student accommodation in the UK is turning out to be a great sector for investors to invest. It offers excellent returns and with more foreign students from wealthy backgrounds heading to the UK to study it is becoming even more attractive than ever before.
For those who have made the decision to invest in student accommodation which investment do they opt for? A home with Multiple Occupancy (HMO) or a purpose built student property?
Choosing to invest in student rental investment property will ensure that the investment risk is low with high returns.
Many of the student rental investment properties currently available are en-suite room situated in older properties throughout a number of large UK cities. One example of this is the Old Fire Station in Liverpool which has been sold to developers who are going to turn the property into student accommodation that is aimed at those overseas students who are wealthy. Each room will have an en-suite and all will be sold as individual units to investors who are looking for an investment that requires very little input in terms of management. Investors are looking to make their money work harder as savings are being eaten away by poor interest rates as well as inflation. Investments such as this are generating yields of around 10% and this is why many 45-55 year olds are looking to protect their retirement funds.
Investors have another option through a home with multiple occupancy which should see returns of 8-12%. These properties usually consist of 5 bedrooms are often situated close to the universities. These do require more management than student rental properties as there are criteria that have to be met.
Landlords will have to apply for a HMO licence and this can take time and it also costs with prices ranging from £400 to £1,100. Purpose built student properties are built using high quality materials and fittings. It is common for a HMO property to require refurbishment in order to bring it up to the required standards and all of this costs money and eats away at the bottom line.
For student rental properties, the cost of maintenance is spread across the number of owners and is often included in the annual service charge. For those who chose to invest in HMO properties things are slightly different because the landlord has to deal with all costs. Problems such as plumbing and even boiler problems are the responsibility of the landlord.
HMO properties offer excellent capital gains but the net yields are lower than that of rental student accommodation investment property and this is why they are more suited to those landlords who like to take a more hands-on approach. However, student rental investments offers those investors who want to take a step back an excellent option. There is less hassle than seen with HMO investment and this makes it an easy investment.