During
the 90's Britain experienced a buy-to-let boom and
property became an increasingly popular investment
for lots of ordinary people like you and I. Mortgages
were readily available and thousands of fledgling
investors joined the buy-to-let boom with the dream
of retiring and sailing off into the sunset.
Unfortunately for quite a few of these novices the
reality was that they bought over priced properties
in the wrong area that had no cash flow and very little
chance of increased equity as they had already paid
too high a price to buy the property. For a lot of
these investors it was only a matter of time before
the bubble burst and the bailiff came knocking. Mark
Hobbs, founder of StudentDigz, has witnessed first
hand how a perfectly intelligent gentleman (albeit
a naive investor) who had a great career in a very
well paid job got gobbled up into the buy-to-let boom.
He left his job, got bad advice, bought the wrong
properties, which were mortgaged up to the hilt, had
more bad advice and started buying plots of land with
a view to building houses. Eventually, not only did
he lose the investment properties but also the plots
of land with half built houses on and, worst of all,
his home. I had watched someone go from earning 80
- 100k a year to claiming Benefits in the space of
just 5 years. “I could not believe my ears the
day he walked into my office and asked if I had any
jobs available”, Mark Hobbs says.
However, it wasn't all doom and gloom. Many savvy
property investors quickly noticed that there were
certain "golden nuggets" amongst the many
property assets available, one of which was, and still
is, the Student Property sector. But why is that?
Student lets are high-yielding
and in demand
The main reason why investors like to invest in student
accommodation is because it is generally higher yielding
than the rest of the private lettings market. With
a student property you can achieve a much higher monthly
rent, so cash flow can be very good. As with any property,
you have to make sure you buy the right property,
in the right area, at the right price. As a like for
like comparison you can compare two properties of
the same size in the same street but the property
that is ready for let to students will always rent
for a much higher amount due the nature of having
a number of individuals paying rent, as opposed to
a single family. It is likely that you will pay more
for the student ready property, but in my experience
if you shop around you can find properties that are
only 10 - 15k more than a similar residential family
home, but over time the student property will earn
you a great deal more in rental income, if not also
in equity.
More experienced investors with funds available tend
to buy a property in the right area at a much lower
price and carry out the student conversion themselves.
Mark Hobbs says "A student property conversion
should only be carried out by an experienced investor
unless you have the ability to use an advisor, like
ourselves, to oversee and advise throughout the process.
There are a lot of regulations and red tape to negotiate
when converting a property for rent to students but
it needn't cost the earth if you know what you're
doing".
Rising
Student Numbers and Rising Global interest in the
UK higher education system
Although there has been a slight dip in the number
of students following the restructuring of University
Tuition fees in 2012, UCAS, the University admissions
body, has recently announced a new record high of
495,596 students entering full-time higher education
in 2013, a 6.7% increase on 2012 figures.
Additionally, it is no secret that there has been
a rising global interest in the UK’s education
system due to its world-class education, research
and innovation and its internationally recognised
qualifications. Over the past few years there has
been a drastic increase of students who come flocking
from all over the world and can pay up to £20,000
per annum in tuition fees, depending on their student
status. Non-EU students in particular are willing
to pay these prices as they know that a degree from
a UK University will often secure them higher paying
jobs back in their home countries.
“At our StudentDigz branch in Swansea, we have
housed well over 16,500 students over the past 13
years of which many are now from countries such as
China, Saudi Arabia, Nigeria, Pakistan, Russia, and
India. The UK really has become a global hot spot
for international students”.
It is important to note that international mobility
is often due to programs such as the Erasmus program,
a student exchange programme established in 1987 by
the European Commission to facilitate the exchange
of cultures and languages, or other direct partnerships
between Universities around the world. The directors
of StudentDigz (Manchester), Edouard Clark and Dilan
Omari, can easily relate to this phenomena as they
have lived in Brazil, Germany, France, South Africa,
the UK and the USA during their time as students and
as long as these programs and partnerships exist between
the Universities, and the British education system
keeps its prestigious position in the world, there
will always be international students that strive
to study here.
Mark
Hobbs adds “My experience is that the numbers
of international students studying here and renting
properties from us is growing year on year. This confirms
that the UK University Degree is seen as a valued
commodity and whilst that remains the case it can
only mean a positive outlook for student property
investors”.
Fixed-term tenancy and Cash-flow planning
“Another advantage of investing in student property
is that the properties mostly rent out under fixed-term
tenancies for a length of 12 months and many students
reserve their property as early as November or December
for a move-in in September of the following year”,
says Dilan Omari, ARLA & Director of StudentDigz
Manchester. “This not only facilitates cash-flow
planning for you as an investor, but it also gives
you enough time to find new tenants”.
What you should know before investing in student property
It is important to know that the profit you can make
from student property can be exceptional, but it is
also important to know that actually letting and managing
a student property is another topic altogether. It
is not only hard work but also very time consuming.
Especially when you are dealing with young Students
who are often away from home for the first time, and
of course when dealing with their Parents, who quite
naturally, are very protective of their youngsters.
Then, in addition to the pressure of having to fill
your rooms year after year, you also need to think
about all the legal paperwork, the protection of your
deposits, your inventory, your rent collection, your
interim inspections, your maintenance repairs, the
lost keys, the out of hours calls - and of course,
the dreaded arrears!
But it doesn’t stop there. If you own a HMO
(House in Multiple Occupation) it becomes another
whole different ball game. For example, you have to
ensure your property has a multitude of certificates
in place and that you follow The Management of Houses
in Multiple Occupation (England) Regulations 2006.
And if you are like most people and you have a full
time job, you may not always be in the position to
deal with the demanding day-to-day management of your
property. Besides, you probably chose to invest to
make money, not to end up getting tired and stressed
out because you have to deal with all the responsibilities
that come with managing your student tenants.
Don’t fall into the trap of letting your investment
property manage you
Find
an agent who can help you leverage your time and investment
and who specialises in the management of student properties
and HMOs. If you had a toothache you wouldn’t
go to your local Doctor would you? He could numb the
pain for a while but really you should have gone straight
to the Dentist, as that’s what he does all day
every day and he is the specialist in the field.
Same
rules apply for the management of your student property.
A student letting specialist, like StudentDigz, understands
what is required by student landlords and students
alike. Mark Hobbs knows that “Managing a residential
family home is completely different to managing a
student property that has anything from 2 to 12 young
student tenants living under the same roof. We have
therefore adapted our systems and tools over the past
13 years to make sure we deliver a service that is
best suited to the student market”.
An example of this is that students will not search
for properties in the same way as someone who is looking
for a residential let. They will use different methods
and different media and what is an important selling
point for a student when looking for a their next
digz is sometimes not even a consideration for a residential
tenant.
If you would like to find out more about how StudentDigz
can help you manage and let your student property
in either Swansea, Manchester or Salford, don’t
hesitate to call 0161 312 2544 (Manchester Office)
or 01792 600 227 (Swansea Office)!
