The Risks of Investing in Student Property

The Risks of Investing in Student Property

The student property market is a savvy investment move for most investors. With 87%, of the 602,000 new student accommodation spaces created last year, being private investments – this high yielding investment is continuing to be increasingly popular amongst those wishing to diversify their portfolios. Furthermore, given the £4.5billion injection in the industry in 2016 by private investors and the increasing number of students each year, the student property market has proven to be a beneficially well-calculated investment. However, regardless of the many benefits of such investment, there are also some risks that come with this opportunity.

One of the risks of investing in student property is the fact that there is higher possibility of wear and tear in student properties. This is attributable to the student lifestyle, therefore close management of the property is considered more necessary with this type of investment. Although a hands-on investment may not be an inconvenience, or even be preferable to some investors, there are similar but alternative investment options. For example, Holiday Home Investment is considered to be a hands-free option considering that the whole process is managed by HyLife’s trusted holiday resort partner.

Another risk to consider involves the void periods of tenancy from the months of May to September. Taking into account that the academic year runs from September to May, student property landlords are at risk of losing out on income rent during the summer months of June, July and August. Taking the quiet periods into account investors may consider looking at care home investments, the all-year demand for this type of property renders this investment much more risk-free.

One more risk that investors must be aware of before investing in student property involves the fact that it may be difficult to conduct credit checks for tenant applicants because it is students (typically young adults) that would occupy the property. Although there is a way around reducing the risk caused by this. The United Kingdom runs a guarantor scheme on student properties, where student tenants are required to list an individual that would acquire legal responsibility for any potential late payments on rent. Through this, the risk of entering a contract with a student, in particular, is significantly reduced and rent is essentially guaranteed given that  the scheme is put in place contractually. However, this may attract more regular management fees due to the quick turnover of student’s tenancy.

Finally, the last factor that we recommend you to consider is that although student property is considered a recession-safe investment because students will continue to attend university even in economic downfalls, there are alternative investment options that are even safer options. For example, care homes are regarded a recession-proof investment because ageing is inevitable and the need for specialised care is a proven constant, thus deeming a continuous demand.

Overall, student property investments definitely do have some risks that come with this opportunity. Student accommodation is seen as an alternative buy to let property, for this reason investors should consider all available property options before committing to student property.

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