A Complete Guide to Student Property Investment

Every year, the UK has almost 3 million higher education students studying at one of the country’s 160+ universities with this number continuing to grow larger.

However, as the number of students pursuing higher education in the UK continues to grow, so does the demand for student accommodation such as Purpose Built Student Accommodation (PBSA).

This increased demand for student accommodation can create lucrative opportunities for investors looking to take the first step into investing in student property. In this guide we’ll explore the ins and outs of student property investment, including how to do it, the pros and cons, as well as how to cash-out of your investment should the need arise.

What is student property investment?

Put simply, student property investment is just another form of buy to let investment that is targeted exclusively to students. Over the years, many student investments were into houses or flats, but as time has moved on so have the demands of students looking for accommodation.

With the introduction of PBSA, many students look for accommodation that has more luxury features such as on-site gyms, common areas, cafes, and rooftop gardens. This change in the wants and needs of students can mean a higher level of rental income for investors.

Is student property a good investment?

Whether or not student property is a good investment is dependent on each individual’s goals for what they want to achieve from their investment. Student property has it’s own advantages but also its own unique drawbacks.

Advantages of investing in student property

Student property investment can be a excellent starting point for investors just starting to grow their portfolio. This is due to the lower cost of entry into these types of investments with many entry-level student properties typically being priced below £125,000.

Student property investments also have a range of other advantages for investors such as:

• No Stamp Duty – Due to the reason that many student properties are priced below £125k, investors often won’t have to pay any Stamp Duty rates under The Finance Act 2016. However, some exceptions do apply.
• Fully Managed – When investing in PBSA, the developers will often appoint a dedicated student accommodation management company to run and maintain the entire site. This includes the sale process as well as the letting of the properties come term time. This means that the investment requires less manual input from the investor.
• High Demand – Every year there is a new influx of higher education students in the UK, whether these be domestic or international students. This demand is compounded by the fact that many university towns and cities have a critical shortage of student accommodation. This creates an excellent environment for investors as they can remain confident that there will always be demand for their properties.
• Better Assured Returns – The typical new-build buy to let investment will come with between 0 and 3 years of assured rental returns in order to incentivise investors. With student properties, it isn’t uncommon to see developers off upwards of 8% NET returns for up to 5 years.

Disadvantages of investing in student property

Despite the many upsides of student property as an investment, no good thing is perfect. Following this logic, investing in student property does come with its own set of disadvantages including:

• Financing – Student property is classed as a commercial investment which means it is often difficult to secure financing for many student investments as most mainstream lenders won’t lend against this type of asset class. This can result in many investors having to pay cash for a student property investment.
• Resale Market – When it comes to exiting from your student investment and selling the property, investors will only be able to sell to another cash investor and not a tenant. This can restrict a seller’s options and extend the sales process of the property.
• Capital Growth – One of the primary disadvantages of student property investments is that they often see reduced levels of capital growth to a typical residential buy to let property. This means that investors more focused on the capital growth of their portfolio properties may be better suited to investing in residential properties.

How to invest in student property?

Investing in student property is very much the same as investing in residential property in that many of the considerations investors have to make are the same. However, there are some slight differences between the two, here we’ll outline the key considerations investors will have to make when investing in student property.

Decide on the type of property you want to invest in

First you must decide the type of property that you want to invest in. With student property you there are 2 primary options; HMOs and PBSA. HMOs can be a good option due to their potential to offer high rental returns when the property is at full occupancy. However, the cost of buying a HMO vs a PBSA unit is much higher. Additionally, with HMOs being privately owned investors will be liable for the management and maintenance of the property themselves.

This is where PBSA provides an excellent alternative. PBSA properties have a much lower cost of entry as investors can purchase individual units from developers with some units coming in as low as £50k. In addition to the lower cost of entry, many developers of PBSA appoint a dedicated management company to handle the lettings and maintenance of the entire site making these types of student properties a more “hands-free” investment.

Decide on a location

Once again we come to the question of “where should you invest?”. This can be dependent on a number of factors such as whether you wish to have a close proximity to your investment, student populations, availability, and more.

However, when it comes to student property the levels of demand in different locations don’t have as much fluctuation when compared to residential properties due to the regular influx of new students to these areas and the shorter term tenancy agreements that student accommodations are known for.

Find your property

Once you’ve considered the other elements of the investment, you will then have to find a property that meets your criteria. This can be done in a number of ways however the easiest way is to make your investment through a specialist property investment company (like us!) who will have in-depth knowledge of the areas you’re looking to invest in as well as be able to help you through your property search.

Best student property investment areas

With so many universities situated across the UK, where are the best places to invest in student property?

Manchester

Manchester is one of the most popular student locations in the country with a student population of 100,000. This high numbers of students coupled with Manchester’s affordable property prices makes Manchester a lucrative prospect for investors venturing into student property.

A lively nightlife and excellent amenities around the city also contributes to the raised demand for student property across the city’s 5 major universities. Learn more about Manchester property investment in our Manchester Property Investment Guide.

Liverpool

With a student population of more than 70,000 and an average gross rental return of 7.92%, Liverpool is one of the best places to invest in UK student property. Liverpool is home to 5 universities, an active nightlife scene, and some of the lowest property prices in the UK.

On top of this, Liverpool is seeing an excellent level of capital growth with property prices over the last year being 9% higher than in 2022 on average. This creates an excellent opportunity for investors.

Learn more about Liverpool property investment in our Liverpool Property Investment Guide.

Leeds

Leeds boasts a student population of more than 60,000 across 5 different universities, making the city yet another top contender for the best student property investment locations in the UK. The city offers an excellent living experience for students with an extremely active nightlife, many restaurants, bars, and social activities taking place year round.

The city is also extremely affordable for both students and investors with average property prices of less than £300k (and even lower for student properties) and average weekly rent for students sitting between £60 and £125. These factors are also compounded by the fact that the average rental yield across the entire city sitting at 6.55% with some areas even reaching above 7% yield.

Learn more about Leeds property investment in our Leeds Property Investment Guide.

Sheffield

Continuing with Yorkshire based university cities, Sheffield makes the list boasting more than 60k students every year across the University of Sheffield as well as Sheffield Hallam. Similarly to Leeds, Sheffield offers investors affordable property prices as well as high demand for student accommodation.

Despite the slightly lower city average yields to its neighbouring Leeds, Sheffield offers many postcodes with significantly higher yield than that of the overall average. For example, the S1 postcode spans the entirety of the city centre offers rental yields up to 8.66%!

Learn more about Sheffield property investment in our Sheffield Property Investment Guide.

Birmingham

This list wouldn’t be complete without mentioning the UK’s second largest city, Birmingham. Birmingham offers investors a student population upwards of 100,000 and average rental yields in excess of 7.5% making the area an extremely lucrative student property investment hotspot!

The city offers excellent educational prospects for students across the 5 universities situated there. If you’re interested in investing midlands-based student accommodation, Birmingham is surely the place to do it.

Learn more about property investment in Birmingham with our Birmingham Property Investment Guide.

Student property vs residential property investment

Both student and residential property have come with their own benefits. Student property offers investors lower costs of entry, less frequent void periods and, on average, higher yields. However, residential properties offer the investors to make increased returns through capital gains and the appreciation of their property’s value.

However, despite the benefits of each type of property, they both come with some drawbacks. Due to the fact that student property is considered a commercial investment, it can be difficult to find funding so many investors have to pay for student properties in cash. Additionally, student properties often see lower levels of capital gains. On the other hand, residential properties can have longer void periods with guaranteed demand for rental properties. Residential property also tends to have lower rental yields when compared to student property, though they are continuing to improve.

All in all, the argument of student vs residential property investment depends on each investor and what they wish to get out of their investment. If you’re looking for a low cost of entry, guaranteed demand, and high yields then student property may be for. However, if you’re investing to make the most of capital gains or would prefer to manage longer term tenants then investing in a residential property may be the better option.

Invest in Student property!

Want to invest in student property? Here at Pure Investor we have a wide range of student properties available for investors. Browse our available properties on our website today!

If you want to speak to one of our property experts, feel free to call us on 0161 337 3890 or email enquiries@pureinvestor.co.uk.

Why choose Pure Investor?

The key to the success and growth of Pure Investor in recent years has been our location on the outskirts of Manchester. Strategically located to offer all our consultant’s easy access to Manchester, Liverpool, Sheffield, and Leeds, we are regular visitors to all the major property developments within the key Northern Powerhouse destinations.

We are passionate about the growth and development within these locations, ensuring our consultants have a high level of expertise regarding the development opportunities within these key growth areas. For this reason, many investors choose to speak with Pure Investor first when considering property investment in the North England.

We genuinely believe in working with our clients, providing a high quality of service and information, allowing our clients to make their decision on a more informed basis. As a result of this, an increasing number of investors are choosing to return and utilise our services on an ongoing basis. This is something we are incredibly proud of, and which we are looking to continually improve on in the future.

If you are considering in investing in a property in the North of England, and don't fancy the 'hard sell' approach, please feel free to get in touch on either enquiries@pureinvestor.co.uk or call 0161 826 4606.

We look forward to hearing from you!