Should You Invest in Student Property?


People protesting with signs on the city streets. Manifestation of activists.

Investing in student accommodation is a popular route for many would-be buy-to-let investors, and many of our prospective clients come to us expecting this will be the first investment mode offered to them. However, at Cox & Co, we’re not necessarily the biggest fans of this form of property investment.

In order to explain our stance, today we’ll take a closer look at some of the pros and cons of buying student property so that you can make an informed decision on whether or not this is the right investment avenue for you.

Types of student property investment

Broadly speaking, there are two forms of student property investment people tend to opt for: HMO property (houses of multiple occupation) and purpose-built student accommodation. 

An HMO property is a popular choice for students after their first year as they leave their halls of residence. These properties usually consist of 3-6 bedrooms and allow students to live together with their friends. Edinburgh’s numerous tenement buildings with their large flats near the city’s universities are always popular with students.

Purpose-built, private student halls are also becoming increasingly popular in Edinburgh, with new developments going up all over town. These buildings offer small, pod-style studio flats for students, often with extra facilities like gyms, common rooms and study areas within the building, all managed by a private company.

Reasons people invest in student property

There are two reasons why people tend to invest in student property: some do it in order to provide an affordable place to live for their children leaving for university, while others simply opt for it for its profitability.

Those who buy student property in order to provide a roof over their child’s head often do so hoping to save some money on their rent. And when they opt for an HMO flat their child can share with friends, they can expect a healthy return on their investment if they play their cards right.

Then there are those who are simply in the student property investment game for the monetary advantages. Student property in university towns like Edinburgh is always in high demand, and investing in HMO property can bring in a very attractive return on investment because you can charge rent by bedroom. Those investing in purpose-built student halls can also benefit from the on-site property managers who can practically eradicate the investor’s need to be involved in the everyday running of the property.

And while of course, it’s your duty as a landlord to provide a safe and comfortable home for your tenants, young students, on the whole, are usually less demanding when it comes to the cosmetic condition of their home than, say, young professionals. They’re often happy enough to overlook something like slightly outdated decor and signs of wear and tear, which could save you some money.

Drawbacks to student property investment

But, as the saying goes, if it was that easy, everyone would be doing it. Here are some of the reasons investing in student property might not be for you.

First off, what you need to understand about student property is that while there is a lot of demand for it, this demand is largely seasonal and if you fail to plan accordingly, you’ll risk void periods in your property. Most students are looking to move into their new flat in September, just before the start of the fall semester. So if you do buy student property, you should make sure it’s ready for viewings and tenants a good few months before the next academic year starts.

Similarly, many students are only looking for somewhere to stay between September and May. While many landlords will opt for a 12-month lease regardless, you might have better luck securing tenants with a 9-month lease. Either way, you’ll likely have an empty property during the summer – this can pose a security risk and, with a 9-month lease, mean no rental income during the summer months.

Second of all, you can expect more wear and tear when you’re dealing with student tenants. While plenty of young people are nice and responsible tenants, many of them are yet to learn how to care for their home properly and might not show the same respect to your property that a slightly older tenant might.

When it comes to HMO property, you also need to keep in mind that getting an HMO license is not a piece of cake. The legal requirements around things like bedroom sizes and fire safety are very strict and you’ll likely have to carry out some renovations before qualifying. The process of applying for an HMO license is not free and you’ll need to repeat the process every three years.

Meanwhile, purpose-built student property might not always be as good an investment as the property developer is promising, as their resale value and capital growth potential are more susceptible to fluctuations in this competitive corner of the property market.

Edinburgh student property market & how Cox & Co can help

Edinburgh is one of those cities that’ll always be home to a large number of students, and now that you’ve learned about some of the advantages and potential pitfalls of this mode of property investment, you can make a more informed decision on whether it’s the right option for you.

If you do decide to invest in rental property for students, you need to have a good property manager on your side since student tenants on the whole need more support than older tenants. Or, if you’re unsure if investing in student accommodation in Edinburgh is right for you, a property investment manager can help you find the right investment route for you.

Cox & Co offers expert support for property investors of all kinds and for every step of the investment process, from finding you the right property and funding to finding and managing your tenants. Interested in learning more? Visit our dedicated property investment management page.

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