Student room ownership through Purpose-built Student Accommodation can provide some interesting returns from rental income, but they're certainly not for everyone.Here's a handy checklist and some expert notes to help you decide if they're right for you.
So why not sit down with a nice cuppa or a sandwich at your desk, and ask yourself ...
Is hands-free income appealing to me, or do I like to be in full landlord-style control of my property?
For active landlords, managing and improving their properties is part of their "job" and they embrace and on the whole enjoy it.
Purpose-built student property (or PBSA) on the other hand is by necessity managed entirely by expert specialist facilities management companies. Having research the investment, PBSA investors are satisfied that the management company know exactly what they're doing and to let them get on with it. If you think you'll have "ants in your pants" at this and would want to be involved in the running, furnishing, tenant finding, refurbishing, then PBSA is definitely not for you - because you simply can't do that!
Do I have the time to regularly keep an eye on my property or do I prefer to set and forget?Those with the considerable time and inclination to be a landlord have the choice of whether to spend it on their properties. For those who simply cannot spare the drain of time in their busy lives to run a buy-to-let property portfolio, PBSA probably wins hands-down.
Is my investment background primarily property ownership or mainstream investment such as stocks and bonds or companies?
PBSA In many ways sits between the two. You have the benefit of ownership of physical property assets with the advantage of being able to sit back and enjoy the income. However, property is not a liquid asset like stocks and shares, and your capital is tied up in the asset. Admittedly you can sell the asset but this would take time. So what are you comfortable with?
Am I able to pay for and own the property outright (typically £50k-£75k)?
Off-plan PBSA is predominantly a cash purchase, although we do have access to a lender willing to look at offering a mortgage, subject to status and the PBSA development itself.
Am I looking primarily for income or capital growth?PBSA should be considered primarily a long-term reliable income generator. As it is effectively commercial property, its value is based on achievable rental income, which will rise steadily with inflation over the years. Don't expect residential-style price movements (either up or down). As leverage (a mortgage) is not available at purchase, high percentage capital gains should not be realistically expected and will likely not be the key reason you invest in PBSA.
Do I enjoy researching property investments?
- There is a little more upfront research to do with PBSA that with buying buy-to-let, especially if this area of property is new to you. But as a fully-managed and maintained asset, the rewards of time-saving come quickly.
- Whether you do or you don't, seek out a good partner who can help you with your research (it's what we and other top-notch investment property brokers will do for you).
Am I willing to retain the asset for at least 5 years?
If you think you may need your invested capital back at short notice, then at this stage of your investment life, direct property investment of any kind including buy-to-let and PBSA, is probably not for you, sorry. Property Bonds may be more suitable though, take a look at our blog topic on that subject.
If you still think you're the right type of investor for Student Property, take a look through our Student `Property market Industry Report, to discover the strong case for investment...