Before you begin investing in the highly lucrative student property market, there are seven key issues you need to consider. In this blog post, we’ll reveal what they are, as well as explaining why we think Houses in Multiple Occupation (HMOs) make more secure investments than so-called ‘student pods’ (PBSA).
Step 1: Cost Per Metre
An HMO investment can cost substantially less per square metre than a student pod investment; indeed, some student pods can be 100% more expensive than an equivalent HMO property. Your HMO investment is also mortgeable, whilst pods are not. Furthermore, there is no resale or second hand market for pods, yet thanks to capital gains, you will be able to sell your HMO property easily and often for a higher price than you purchased it for. HMO investment is therefore arguably a better financial choice.
Step 2: Specification
Unsurprisingly, cheaper student properties tend to have significantly lower specifications and are much smaller than others. Factors such as these will lead to lower rent demand, so investing in more expensive units can be advantageous in the long run. These properties are usually finished to an extremely high specification, resulting in higher returns and demand. Ideally, better workmanship will also mean less maintenance is required to keep the property looking its best. When deciding which property type to invest in, you must consider the value for money aspect and always remember the mantra “you get what you pay for”.
Step 3: Location
Ensure your property is in a prime location. It’s important that you do your research and find out exactly where it is, how accessible it is for students to commute to their University and what amenities are available nearby. Where are the local shops, supermarkets, pubs, bars and, most importantly, public transport? Finding a property with a 15 minute commute compared to one that is 30 minutes away can be the difference between you having an 100% occupancy rate and not. The Mistoria Group’s properties are all within easy reach of the universities in Bolton, Salford and Liverpool.
Step 4: Developer
Try and use developers that have a history of building, converting or renovating HMO properties. Check their property portfolio; are they of a good standard? Have previous clients been happy with the results? All of these factors should be taken into account when looking for a developer. It is vital you check all of this, as even the smallest mistake in development can result in lower occupancy rates and problems with the maintenance of the property which in turn could result in the loss of investment returns.
The Mistoria Group recently completed a full renovation and high specification upgrade of a large property in Bolton, creating a flagship 15 bed HMO called ‘Mistoria Villa’. You can find out more about the project and take a video tour of the property here.
Step 5: Overseas Students
The number of foreign students in the UK is rapidly increasing, as is their demand for the highest quality accommodation. In general, student accommodation isn’t always of the highest quality, so to attract international students, make yours different from the rest and give people a reason to rent from you.
Step 6: Managing Agent
Finding a credible and reputable company to manage your property is an essential aspect of the investment process. Some investors choose to manage their own properties, which can result in higher net returns, but is not the right option if you do not have the time to attend to regular maintenance issues, credit checks, tenant finding and advertising. At Mistoria International, we’ve been in business for over ten years, so we know how much effort really goes into the management of student lets. We would be more than happy to advise you of what approach would be best for you given your current situation. You’ll know you’re receiving only the highest quality service, as we are ARLA and NAEA protected, meaning that we meet higher industry standards than the law demands. Our experts undertake regular training to ensure they are up to date with best practice and complex legislative changes so they can offer you the best advice. We are also backed by a Client Money Protection scheme which guarantees your money is protected.
Step 7: The Law
You must ensure all legal aspects are covered. There are many things to be considered when purchasing a HMO property. You must make sure you register the property to be licensed. There are many standards that have to be met in order for it to be registered. For example, the rooms have to be a certain size and fire doors must be fitted. As with any property, you need insurance, but this has to be insurance tailored to this type of property rather than just general house insurance. For more information on the latest legislation in the sector, read our blog post.
If you need more information, call the experts in North West property investments, Mistoria International, on 0800 500 3015. We dedicate our efforts to sourcing the highest yielding property for the investment market. Our properties regularly achieve combined yields of 13%.