If Tenant Arrears Are Eating Into Your Profits, Try Low Risk Student Property Instead

Student-Property-InvestmentVoid periods, they can be a huge burden on your shoulders and your wallet.

You might remember me mentioning my investor friend Ken in a previous blog. This is the guy who only invests in UK student property because he likes to have things closer to home.

He tells me it just feels safer for him than investing anywhere else. The problem is, his play safe approach has begun to cause problems because he now has one or two properties that are standing empty.

This is proving a bit of a drain on his resources. The situation was made worse when the person he employed to carry out the maintenance on his properties decided to leave.

Now there is nothing wrong in my friends decision to invest only in UK property, however his decision not to include some student property in his portfolio might well have made him more money.

IF he had listened to some of the headline figures released by the likes of Knight Frank who say they expect returns from student property to increase 12% this year with rental yields growing by 5% then he might well have changed his view.

Last year alone UK investors put nearly £348 million into the student property market according to research from CB Richard Ellis and they are chasing average net yields of 7% or higher.

Compare leasing property to Mr and Mrs average tenant and their family who will occupy their home without paying any extra in rent and letting that same property to students on a per-room basis.

You can see why landlords made an average income of 6.45%, compared to 5.94% to non-students.

This year even the banks are waking up to the potential of student housing and loosening their purse strings a little to investors.

The number of mortgages available for student lets has improved significantly and investors now have a choice of about 50 products from half a dozen lenders according to a recent article in the FT.

The imbalance between the supply and demand for student accommodation combined with high demand for university places makes student property one of the fastest growing area of property investment in the UK.

Universities campuses are continuing to expand across the UK’s towns and cities as demand for places from foreign students continues alongside demand at home. Competition for places at some of the best universities is hotter than ever and so is demand for accommodation of a good standard.

According to Savills Student property has outperformed many commercial property asset classes over the past five years. Meanwhile the number one destination for student property investors is London where yields continue to climb due to a structural shortage of accommodation.

The fact that there is such demand for student property in cities like London means voids will be low as there is always a steady stream of new tenants waiting to move in.

So as I say to my friend Ken, “if you really want to make high returns from UK property, educate yourself on student property and avoid those troublesome voids.”

Are you a landlord or investor finding it difficult to live with voids? Please leave your comments below:

Kind regards

Loxley McKenzie
Managing Director

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