Student Housing: The Hidden Gem of Real Estate Investment

Building up your rental property demands a strategic approach and planning beyond merely identifying properties that are available for rent. It is crucial to understand that each property represents an investment opportunity, and certain locations may present distinctive business models that could be more advantageous than others.

So, where should one look for the secret to the best real estate investments? The student housing investment market has witnessed tremendous growth with the increasing number of international students seeking higher education! According to the Amber Student Housing Report, the student housing industry has enormous potential for returns, with major growth in the United Kingdom, the United States, and Australia for global student housing investments in 2022, with over $22 billion estimated inflow.

UK, USA & Australia have seen an increase in the number of applicants enrolling in the year 2022. With great potential, the market also comes with its own set of challenges. It is essential to understand the market better to determine whether venturing into accommodation for students aligns with your investment objectives.

Understanding the Dynamics of Student Homes

College applicants are at a stage where they are still exploring independent living. For most students, the only experience of living alone is in a dormitory. Many still lack essential life skills such as home maintenance, cleaning, timely bill payments, and many more. As a result, property operators may need to adjust their management style and amenities to accommodate new students.

Renting to these new adults can offer consistent returns due to the high demand for housing options from students worldwide. As long as there is an increase in the number of educational institutions, there will always be an inflow of international students each year, potentially leading to a waitlist for student residences in close proximity to the university.

Why Choose Student Lettings?

International student accommodation offers a unique edge in the real estate market. Consistent annual demand, resilient rental yields, and shorter vacancy periods make it a thriving market. These accommodations stand out as one of the best real estate investments for those seeking a steady income stream and robust growth potential. With the right attitude and tools in hand, students can be profitable tenants. Here's how managing student accommodation can benefit property management groups operating in markets with a nearby university/educational institute.

1. Increased Demand: The most significant advantage in the international student accommodation market is the perpetual demand. This demand is so consistent that there are often waiting lists for student homes near the university, and if an individual alters their plans midway through the year, there is usually another roommate readily available to take over the lease.
2. Foreseen Surge: Due to an increase in educational institutions offering integrated courses, the number of student tenants has risen. Positive word-of-mouth can also work in the favor of property management groups as satisfied student tenants often refer their friends to your property, creating a chain of responsible and good tenants over the years.
3. Recession-Proof: The student housing industry is often considered recession-proof regardless of economic downturns. Enrollment might even increase during recessions, as people seek further education when job prospects are less. Hence, becoming a lucrative market for investors to be drawn in.
4. Multiple Property Options: This presents an opportunity for property operators to offer a range of housing options, from durable, cost-effective accommodations for most students to luxury housing for those who are willing to pay for superior living conditions.

Prerequisites for Student Housing Investment

Each country has its specific laws in leasing properties to individuals under the age of 18 or 21. It is essential to understand these rules as some first-year students may still be minors and may not yet possess full legal rights for various activities while living alone on the property. Here are a few things property management groups should be aware of:

1. Neglecting safety and maintenance standards can have serious legal implications for Property Management Groups (PMGs). Non-compliance, especially around fire safety, can lead to significant fines and potential lawsuits in cases of injury or fatality.
2. Violating local building codes may result in mandatory repair orders. Such oversights not only risk financial penalties but can also damage a PMG's reputation. Thus, drafting your lease agreement meticulously and approaching a person or agency experienced in the field is the key to going about it.
3. In most countries, buy-to-let mortgages require a higher deposit compared to standard ones. A deposit of 25% of the property's value is typically required for student buy-to-let mortgages. The majority of lenders have a preference for applicants with prior landlord experience.
4. However, it is possible to secure a mortgage without any prior buy-to-let experience as long as all other criteria are met. Before you start your journey, equip yourself with the essentials:

5. Property operators can collaborate with industry specialists like Amber, a renowned international student accommodation solutions provider, to improve operational efficiency. With amber's expertise, navigate each phase of property management seamlessly, enhance occupancy levels, and cut down on customer acquisition costs to improve overall profitability.

Critical Touchpoints: Top 5 Factors for Student Housing Investments

1. Selecting a Suitable Area

Selecting an appropriate rental property for student housing is crucial when making a student housing investment. While students are quite flexible about the type of accommodation they live in, it is essential that the property is close to a university or a bus route and is reasonably livable. Students are open to living in small houses and usually prefer shared rooms, although this may vary from region to region. A lively neighborhood with fellow students, hangout spots, and vibrant nightlife is a bonus.

2. Deciding on Property Type

Determining your investment's architecture and long-term objectives is essential before entering student housing investment. There are two major property types to look at – HMOs and PBSAs.

• PBSA (Purpose-Built Student Accommodation): PBSA can act as the best accommodation for students. It can include on-site amenities like gyms, laundry facilities, and communal areas. The cost of PBSA can be higher due to the specialized nature of the accommodation and the amenities provided.
• However, maintenance and management are often handled by a professional company, which can reduce the owner's responsibilities. PBSA are usually in high demand as they offer modern, comfortable, and convenient accommodations for students.

• HMOs (Houses in Multiple Occupations): HMOs are properties where multiple students share facilities like a kitchen or bathroom. The initial cost of purchasing an HMO may be higher as they are larger properties. There are also additional costs associated with managing an HMO and obtaining the necessary licenses. HMOs can generate higher rental yields by renting out multiple rooms individually. There is also a strong demand for HMOs in student areas, which can result in lower vacancy rates.

3. Partnering with a Specialist

Venturing into the student housing investment market is a lucrative and highly dynamic approach to rental properties. The market is as volatile as it is profitable, but you don't have to manage it alone. Utilizing resources, such as amber can streamline your property management. It assists the tenants in managing online bill payments, accessing important documents, and submitting maintenance requests, thus easing the effort required to manage student accommodations.

4. Preparing the Property

Can the house withstand a constant flow of energy, party, exercise, and undertake unpredictable school projects on the premises? Adding some heavy couches and bed frames will make the property student-ready. These new tenants lack knowledge of managing basic utilities like water supply, electricity bills, etc.; thus, adding them to the rent and having a professional examine all gas and electric systems and appliances to guarantee their safety will ensure a comfortable living environment.

5. Preparing Student Tenancy Agreements

The student lease agreement includes crucial details such as the commencement and termination dates of the contract, the security deposit, tenancy conditions, payment schedule and method for the rent, and details of the guarantor, among other things. You can also add a digital element to the mix to make it more accessible to the international audience. Adding a portal or a digital channel to handle queries and resolve complaints through good property management software can be an added bonus. You can safeguard your rent by involving the parents in the agreement for on-time rent.

Wrapping Up

Making student housing investments is a strategic move for anyone looking to tap into the profitable real estate market. However, understanding the dynamics of student homes, the advantages, and the prerequisites for these property investors is crucial to navigating this market successfully. Partnering with specialists, preparing the property, and drafting meticulous tenancy agreements are essential steps. Embrace the challenges and volatilities of the market, equip yourself with the necessary tools and knowledge, and get on your path to success in the student housing industry.

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