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REW’s introduction to investing in Student Property

by Nikki Dale -

We source the best-in-class properties in the UK for investment purposes – with a focus on purpose-built student accommodation – that provides you a fully owned asset and an annual rental income of up to 10% net per annum.

With no restrictions or bias to any one developer we can have only a positive impact on the industry through our thorough property due diligence, experience and feedback.

We explain exactly how it works, as we want you to know as much as us about: the property sector, off-plan property purchase, the property itself and the developer you are buying from.

The best part is we do not charge a finder’s fee or admin fee – why would we?  We are only paid a commission by the developer on exchange of a property, so it’s completely free to engaged with us on any type of property investment you are interested in.

What am I buying?

Purpose-built student accommodation investment is a cash purchase, starting from around £59,000.  You own a long-Leasehold (typically between 125-250 years) property – student studio or en-suite apartment – and your property is registered at land registry.  There is no stamp duty (unless over £150,000) to pay and furniture is included; so, for cash buyers it is a great straightforward option with few upfront costs and no mortgage overhead.

For people investing for supplementary or pension income student property comes with a three to five year assured rental period. Thereafter, students pay a year’s rent upfront and occupancy levels are usually between 99% and 100%. There are no evictions necessary as tenancies are non-residential. This means income is more consistent and voids are much rarer.

How does the assured rental income work?

The developer will employ the services of an established student management company and using their expertise an achievable annual rental appraisal is calculated – along with realistic service charge and management fees.

The appraisal will consider all variables, including but not limited to:

  • Town or City Area
  • Where the development is in relation to the campus and town centre
  • Void-periods
  • Utilities, insurances, service charges, maintenance etc.

Based on the figures produced by the student management company the developer can offer the investor a fixed assured rental income of eg: 8% net per annum for 5 for years.

Developers are so confident after this process that the assured rental is built into the purchase contract of the property, so whether your property is occupied by a student or not the developer has contractually assured you a fixed percentage of rental income which is paid directly into your bank account on a quarterly basis.

What happens after the assured rental period?

Before your assured rental income period ends, your property management company will contact you about continuing with them in their current capacity:

  • Ensuring your property is tenanted
  • Payment of utility bills and maintenance and repairs
  • Transparent statements and paying your net rental directly into your bank account

Annual rents increase approx. 2-3%p.a. During your fixed assured rental period rental rates are gradually increasing year-on-year, so by the time you are out of your assured period, you should be earning more per annum than the fixed assured rental amount.

Project suitability and due diligence

Buy to let property is not a regulated industry and the risks must always be looked at. The beauty of investing in purpose-built student accommodation is you can invest at different points of the build or renovation and if you are 100% risk adverse the perfect investment is a student property that is completed, tenanted and operational.

Majority of student accommodation is sold off-plan due to the benefits, not just to the developer, but to yourself; such as between 3% – 7% p.a. interest on exchange deposit, early-investors incentives like price discounts or an extra percentage on annual rental income and plus off-plan prices are generally 10% lower that market value.

The biggest concern when investing is, is my money safe or what happens if the developer fails to complete the project.  This is where our property check mitigates the chance of this happening.  A project that fails to be delivered by a developer is likely due to the project not being ring-fenced properly or cash-flow not being managed properly.  We check planning approval documents, when the project will start construction and whether the start date is subject to anything e.g.: build funding.  Also, how the project cost management is controlled and a contingency plan by the developer – so in unforeseen scenarios this will be sufficiently covered.


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