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Is Student Buy-To-Let Property a safe investment?

As an investment, a buy-to-let property has long been a sensible choice. However, letting to students is a very different type of rental with its own unique pitfalls and advantages.

by Mark Burns

Recent changes in stamp duty, mortgage interest relief and letting agent fees has left many landlords pushing rents to higher levels in order to recover some lost income. This has meant that student accommodation has become a tempting option for those looking to enter the buy-to-let market for the first time.

The Student Rental Property Market
Student housing in many areas now takes the form of purpose-built, secure apartments with on-site facilities in city locations. Currently, just over 500,000 students live in this accommodation or reside on campus, with demand for property increasing rental prices.

These purpose-built sites are now pushing for private investors, with the healthy size of the rental yields being an attractive prospect when put next to the relatively low investment price. Often a rental manager who ensures that the property houses a student will charge their own fee, and service fees and ground rent will also need to be paid.

Purchasing Property
When purchasing a purpose-built student accommodation investment, you will usually be expected to buy off-plan with a non-refundable deposit and up to half the cost being paid on the exchange of contracts. The remainder is then paid on completion.

Whilst this does tie you to a fixed purchase price which protects you from rises in prices during the building process, it does also leave you vulnerable to any problems that occur before completion, such as the developer getting into their own financial difficulties. It is worth keeping track of property prices before you invest, to ensure that prices are not likely to fall before you complete. Also, research the developer thoroughly to be sure you are investing in someone who is likely to see the task through to the end.

When you decide to buy, you will always need to employ the services of a specialist solicitor, as well as doing plenty of research on the financial and legal implications of the purchase.

Buying Shares
If a complete property purchase is too big a leap to start with, then it might be worth considering investment in a company specialising in student accommodation. Buying shares in these companies gives you a lower yield but also a lower risk factor.

Selling Student Property
Before you buy a property, you need to know where you stand when it comes to selling it again. Each student buy-to-let scheme is different, so you will need to read the small print carefully. Some companies may impose restrictions on selling to the open market, however, this would not prevent you from selling the property on to another similar investor.

All property investment needs thorough research, and decisions should not be taken lightly. To really reap the rewards in student letting, you need to do your own research first to understand which location to invest in, what the rental yields are like from area to area and what kind or returns are available, taking all the pros and cons into account before making your investment.

*This post was published according to the "Contributed Article Terms and Conditions"

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