Investing in student property is becoming more and more popular.
Students are a captive market, often living within a mile of their campus and needing accommodation mostly when school is in session. This is often about nine months a year, depending on the institution.
Any top Buyers Agent in Brisbane will tell you that investors choose to invest in student accommodation because of the great returns they can make.
However, there are some pros and cons that investors need to be aware of before considering the purchase of student property. In this post, we will look at the pros and cons of investing in student property.
Here are Pros of Investing in Student Property
Large Market
The student market is huge! In Australia, the population of students has increased by over 35% in the last ten years. The majority of people are new students coming to university.
This large market means there are more potential tenants than you would find elsewhere. So, it is almost guaranteed that there will be students pretty interested in renting a property you own.
Low Maintenance
The upkeep of student property can be quite minimal when compared to other forms of rental accommodation. Students are often in temporary accommodation that may be rented for only one year or even shorter before selling upon moving back home or looking for alternative private housing. Therefore, the financial investment is quickly recouped before any income is generated from rent/rentals.
Excellent Returns
The rate of return on student property is high when compared to other forms of investment. This is due to the market being large, low risk, and steady demand.
So you would expect to see about 7.4%-8% rental income and about 11.4% return on investment when you decide to invest in a student property.
High Demand
The student market also demands a lot of property from the landlord. This is especially true in the higher education sector due to the cost of living that goes hand in hand. As a result, students are often willing to pay a premium for good quality accommodation, which is good news for investors.
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Good Prospects for Price Appreciation in Future
Student accommodation usually increases in value as the student population grows, especially in big cities. So, if you are looking to make a small profit in the short term, then investing in student property is almost guaranteed to give good returns.
Additionally, there are a lot of advantages to owning properties located close to a university as they would often increase in value over the long term.
Besides the pros, there are some cons: Here are some of the Cons of Investing in Student Property.
Seasonality
Seasonality occurs with any form of property investment, and student accommodation is no exception to this rule. Most students only rent during the nine months of the year that they are at university.
This means there is a lack of demand for student accommodation outside of this period, sometimes resulting in a lack of rental income until the next wave of students arrives in September. This can be costly for the Investors.
Risk of Non-Payment
Students do not have a steady income, and therefore there is a risk of non-payment on their part.
To mitigate this risk, a strict vetting process is usually carried out to confirm that the tenant has the means to pay for their accommodation before signing the lease.
In addition, some companies also charge holding deposits to confirm the tenant’s commitment to live at the property.
Careful and Close Management Needed
To ensure that the property is properly managed and maintained, it is necessary to employ a property manager.
This ensures that the property is returned to the landlord in good condition and that utility bills are paid on time. So, this can be a significant expense for the landlord.
Need for Upgrades
As these properties are usually old and empty during holidays, repairs often need to be carried out before students move back in again in September.
Therefore, investors need to consider how much money they are willing to invest in protecting their investment.
Overall, the pros of investing in student property outweigh the cons. Students are an excellent market for investors. Although they can be challenging to manage and maintain due to their young age and lack of capital, they tend not to require much maintenance or management once settled in, so long as you employ an excellent rental management company. As a result, you will be able to reap the rewards of your investment.
Remember, student accommodation is not suitable for everyone, but if you are looking for an investment that has a good return on investment, then student property could be the right type of investment for you.
