How to succeed with Student Property – Tip 2 : Look Beyond the Headlines

Welcome to our second post with tips on what to do when considering purpose-built student property investments.

You’ve likely heard the phrase “if it seems too good to be true, it probably is”, right ? (I could spend a whole book chapter unpacking that piece of received wisdom, in fact I shall do soon – it’s fascinating !).

Being objective

But objective investment research requires put aside the scepticism as well as any giddy excitement. It’s a stoic activity, but one we all find difficult to some extent, as most buying decisions involve emotion at some level !

When it comes to a passive investment such as buying a student room in Purpose-built Student Accommodation (or PBSA for short), one should approach the claims of the property developer or agent with a curious mind.

Here’s an example: “Fixed returns of 6% for 5 years”. These terms are often offered by the developer as an incentive to buy the student rooms. This is a reasonable idea as it provides some comfort for the buyer whilst the student hall ramps up to speed in the first few years of operation.

That said, these offers are largely irrelevant for well-run new halls, as good student facilities companies of halls built in the right location should enjoy full occupancy at market rent from opening. It can however, mask problems with poor location and bad management

So, as an intelligent investor, here are some key questions to ask yourself:

  1. is the student hall in the right town or city, and the right location?
  2. is the student demand there? – some good signs are: investment being made into university facilities and infrastructure; an excess of private student houses of multiple occupation; strong postgraduate programme; growth in local student numbers over the last 5 years.
  3. looking at similar private or university-run halls in the area, do the rents match the estimates provided by the developer’s estate agent to the investor? Get out the spreadsheet – real numbers reveal the true story!
  4. does the company set to manage the hall have a strong, long track record of experience with running student halls and advertising them to students to drive the best rents and highest occupancies.

Intelligent investment involves looking beyond the juicy headline figures, being neither carried away by them nor dismissing them out of hand.

Black and white or shades of colour?

Investment due diligence seeks to simply get to the truth and make an informed decision. It’s harder work than just accepting or rejecting the headline figures, but ultimately far more helpful.

At HighGround Property, we operate unusually detailed due diligence on every student hall investment we consider and, as a result tend to reject around 80% of all investments that appear on our desk. Only those that pass our exacting standards are one’s you’ll see from us.

Discover more about the world of student property with our Expert Guide. Click now.

Property Investors: why you should follow the UK Government money

In this week’s November Budget, the UK Chancellor has left us in no doubt – punish landlords and reward property developers.

Warning: this is a lengthy but important post. If you are at all involved in property investment, or thinking about it, read on.

Building good, renting bad

The UK Chancellor Philip Hammond this week made it very clear that a key objective of this government is to build houses. And build at a rate last seen in the 1970’s. Substantial funding and support is being offered to developers to build the 300,000 annual homes construction targets. We applaud this but we as investors need to adapt – and quickly.

This government strategy includes continued support for corporate “Build to Rent” (B2R) developments, which we believe puts further long-term pressure on small private landlords to compete and make a living.

“Hooray! It’s not worse”

Some commentators are suggesting that because no further punitive measures have been placed on Landlords this time round, this is to be celebrated. Unfortunately the reality is, in the last two years so much damage has been done the message to private BTL investors is sadly clear: “you’re not welcome”.

I’m of course talking about:

  • the 3% Stamp Duty surcharge for second homes (primarily affecting buy to let investors trying to grow their businesses);
  • the devastating changes to taxation of mortgage interest for private landlords;
  • the emergence of trial rent controls (expect this not to go away!);
  • the “demonisation” of landlords in the media;
  • the growing frustration of Generation Rent desperate to get on the housing ladder.

So it is clearly government policy: we can expect to see the rise of many small and medium-sized property developers, and the decline of small-scale private landlords as they are forced out financially and replaced on the whole by (albeit largely middle-class) first-time buyers.

The problem is that development funding is today still hard to find, and despite government money, this is likely to remain a major bottleneck for getting builders to build. The need for private funding for developers through crowdfunding, property bonds and good old-fashioned joint venture partnerships is going to become more important to the government vision than ever before.

“Whatever your political view on this, it would seen very sensible for property investors to recognise this sea-change quickly and look to either build property, or finance those who do.”

Which team would you rather be on – the aided or the persecuted?

It is time for landlords to review their long-term strategies, especially if they do not currently include adding “asset value” by developing, extending or carrying out major refurbishments. For a growing number of property investors, buy-and-hold residential letting is no longer the Holy Grail it used to be, and may never be again.

In the light of government-backed “landlord persecution” some landlords have pledged to sell their portfolios, but may have no clear plans where to invest the profits.

As a business, our focus is set firmly in line with the government camp, at least as far as supporting development is concerned. We support small developers by connecting them with investors large and small through Property Bonds, Crowdfunding, and other collaborative ventures such as student room ownership in new purpose-built student accommodation. We have been doing this for a decade and long before it was fashionable. We believe in wealth creation through property now more than ever.

Here’s one example of how investors can profit from great UK property developers today. It’s possible to invest in midlands-based Godwin Capital from just £5k and enjoy double-digit fixed annual income through property plus your capital returned in two years. All without the need to lift even a hammer.

How to succeed with purpose-build student rooms – Tip 1

There’s no denying the success of Purpose-built Student Hall Accomodation in the UK. Demand for quality student living is still constantly outstripping supply, even as the number of new builds grows and competition between them is getting tougher.

Canterbury Hall Roof Garden, Preston

In this new era of student choice, it’s more important than ever to have the facilities that students actually want to use and frankly “beat up” the competition with them.

These days we are seeing “student magnates” for helping the students – and crucially their parents – choose their digs. And that more often than not means comfort.

If the student apartment or block you own offers features like …

  • self-contained apartments (no sharing kitchens, thanks!);
  • services – local newsagents and hostelries;
  • bragging rights – gyms, cinema rooms and even private roof gardens

… then you’re onto a winner. That property when rented out by an experienced student facilities manager, is going to enjoy the highest possible rental income and occupancy (and therefore property value), for many years to come.

Have a look at our student guide now, and get in touch quickly if you would like to know more: