Buying student accomodation. Thoughts?

[Thankyou4calling]

I'm getting E mails offering some great returns investing in student accommodation. Is it too good to be true? What are the downsides and risk?

https://www.google.co.uk/url?sa=t&rct=j&q=...

[Welshbeef]

Thankyou4calling said:

I'm getting E mails offering some great returns investing in student accommodation. Is it too good to be true? What are the downsides and risk?

https://www.google.co.uk/url?sa=t&rct=j&q=...

Yes.

Offering test returns or guaranteed returns for x years simply means they have baked that into the price you are paying.

[Thankyou4calling]

Welshbeef said:

Yes.

Offering test returns or guaranteed returns for x years simply means they have baked that into the price you are paying.

The price is less than the returns over a 10 year period.

[blueg33]

Depends on the scale, the provider and where void and maintenance risk lies.

We develop and build student accommodation and sell it to pension funds with yields circa 5.25%. Void risk is usually parked with the "provider"

[hondafanatic]

Jokey answer - Well if it's anything like student property in Lancaster then youll be running around in some nice cars with private plates in no time. Just check when you expand into takeaways that your staff have work permits.

(Sorry - not very helpful but it's a bugbear of mine)

Serious answer - The student property business is seriously expanding in Lancaster but that's because the university is also expanding and has a good reputation. So wherever you're thinking of investing I'd check how the uni is doing in terms of expansion etc.

Pros - you get more money as you're renting out rooms - as long as the worst doesn't occur and your property gets trashed then you've got a customer base with relativly low expectations.

Downsides - readvertising and contracts drawn up woth more frequency due to short term tenancy and you'll be getting rent for about 40 weeks of the year due to summer holidays etc.

You need to be up to date with HMO and how many toilets/smoke alarms etc you'd need for the property.

It's also useful if you have a good list of contractors - cleaners/decorators etc that come come in quickly when required. I have a friend who has a cleaning contract business and his main flow of income is students homes during June/July.

The developers in Lancaster are doing very well out of it but they own a lot of properties.

[Thankyou4calling]

Thanks for the replies.

I'll summarise the offer:

Buy a studio in a block for c£45,000, you own the lease.

Studio is fully furnished, let and managed and you receive income, net of deductions of 10% per year.

The studio is yours to sell.

So you don't have to find tenants, don't have to deal with breakdowns or call people out.

Does anyone do this or know of it?

[joshleb]

I always see options like this, but I just feel surely there's a catch....

I would read well into any clauses there are with regards to maintenance costs or ability to sell when it comes to it.

Also, refurb costs, I remember when I was at uni, the halls were refurbed every couple of summers.

[blueg33]

Whats the rent pa on the studio?

How long is your lease?

Who do you have a relationship with to find tenants?

[Thankyou4calling]

Good questions.

The rent is determined by the management company, you own a 250 year lease. management company find tenants.

All returns are garunteed and net of any fees or charges.

[bigandclever]

Thankyou4calling said:

All returns are garunteed and net of any fees or charges.

Unless they go bust, as several have over the last few years.

Also, what's your exit strategy? You're probably only going to be able to sell to someone else who wants that type of investment.

[blueg33]

The fundamental factor then is the underlying financial strength (covenant) of the company managing the lets. Is it a major provider? What is their asset base? Are the assets ring fenced? What management and letting strategies do they employ? What other major student lets are in the pipeline?

But the biggest question of all for me is

If this is a provider with any track record and covenant then why aren't they selling to the major pension funds who invest in this sector on a daily basis?

The funds will only buy where the risk is known and backed off with proper mitigation

[Thankyou4calling]

Why aren't they selling to pension funds etc ?

Maybe they are, i don't know.

Why do companies sell franchises when they can make more money running outlets themselves.

I'm going to look into it more, perhaps see if I can talk to some of their investors (unsolicited) and see if the reality is as good as seems.

[drainbrain]

Thankyou4calling said:

Why aren't they selling to pension funds etc ?

Maybe they are, i don't know.

Why do companies sell franchises when they can make more money running outlets themselves.

I'm going to look into it more, perhaps see if I can talk to some of their investors (unsolicited) and see if the reality is as good as seems.

If you're a potential entrant to the resi letting business why don't you consider something marketable to a far wider clientele than just the student niche?

[blueg33]

Thankyou4calling said:

Why aren't they selling to pension funds etc ?

Maybe they are, i don't know.

Why do companies sell franchises when they can make more money running outlets themselves.

I'm going to look into it more, perhaps see if I can talk to some of their investors (unsolicited) and see if the reality is as good as seems.

If they were selling to pensions funds they wouldn't have single units available for private investors.

This is not comparable with a franchise, all they are using is your money, they are still carrying the management overhead.

If the company is sound enough, a clean income strip to you as an investor is good for you. What doesn't make sense is that I would expect them to go for the much simpler lower cost option of selling a whole portfolio.

How many units are in the block? If the GDV is under about £15, then most large investors wouldn't be interested and that could explain this strategy.

The fundamental thing is How can you be sure you will get your rent if someone else is collecting it, especially if they are the landlord for the tenant and you are the head landlord.

The one thing that I have learned developing and selling investment properties of this type is that the financial strength of the vehicle letting to the occupier is critical.

[Thankyou4calling]

drainbrain said:

If you're a potential entrant to the resi letting business why don't you consider something marketable to a far wider clientele than just the student niche?

The returns on this are garunteed and at a far better level than most residential BTL, of course the garuntee may be worthless.

[Thankyou4calling]

blueg33 said:

If they were selling to pensions funds they wouldn't have single units available for private investors.

This is not comparable with a franchise, all they are using is your money, they are still carrying the management overhead.

If the company is sound enough, a clean income strip to you as an investor is good for you. What doesn't make sense is that I would expect them to go for the much simpler lower cost option of selling a whole portfolio.

How many units are in the block? If the GDV is under about £15, then most large investors wouldn't be interested and that could explain this strategy.

The fundamental thing is How can you be sure you will get your rent if someone else is collecting it, especially if they are the landlord for the tenant and you are the head landlord.

The one thing that I have learned developing and selling investment properties of this type is that the financial strength of the vehicle letting to the occupier is critical.

I know it's totally different to a franchise, i was merely using that as an example as to why people sell things. The opportunity i'm looking at has 51 units for sale.

If you look at the info it's pretty convincing and for property it's a low level (£50,000) investment.

[blueg33]

If the return is much ahead of other bits of the investment market then there is probably some enhanced risk. I wonder how easy it os to sell on the studio?

TBH if its good and the risk is contained I would be interested, I need to find an investment home for £100k at the moment.

[Thankyou4calling]

blueg33 said:

If the return is much ahead of other bits of the investment market then there is probably some enhanced risk. I wonder how easy it os to sell on the studio?

TBH if its good and the risk is contained I would be interested, I need to find an investment home for £100k at the moment.

You have mail.

[untakenname]

First full year after Brexit and applications for university places are down, if this happens year on year then rents will fall massively as it's a select market.

I would be weary of student accommodation as many universities have built/are building purpose build halls of residences which the students then will prefer, had an friend in Plymouth who has sold his student accommodation as students are now simply not prepared to live more than a few hundred meters away from the uni.

[Yipper]

Student homes are good because you can cram 6 renters into a 3-bedder (partition rooms, etc.). But all profits can be wiped out in an instant by a rowdy night out, etc. It is high risk, high reward.

http://www.thisismoney.co.uk/money/buytolet/articl...