With regards to the available returns on student property investments, there have been numerous reports and articles demonstrating that student property investment has been the highest performing asset class over the past decade. In addition, many of these returns are guaranteed for a period, which is highly advantageous to investors. However, in our experience, there are some fundamental points that must be considered by investors when looking to invest in student property.
The key to successful property investment is assessing what your financial goals are and then selecting the best property sector to achieve those goals. Just because everyone tells you that student property offers the highest returns, doesn’t necessarily mean that it will perform best for you.
For example, let’s take two scenarios. Investor ‘A’ is 40 years old, earns a good regular salary, has £100,000 in savings and is looking to build a portfolio that will enable him to retire early. Investor ‘B’ is 65 years old, earns a small income from his pension, has a pot of £100,000 in savings and just wants extra income to supplement his retirement.
Investor ‘A’ doesn’t need extra income because he already has a good salary. Investor ‘A’ should be focusing on investing in properties that are discounted or will see large capital growth within a few years, so that he can either sell or re-finance the properties to increase the size of his portfolio. He should also be looking to leverage his money to maximise his returns. Over time this method will build a large rental income for the investor so he can achieve his goal of retiring early.
Investor ‘B’ has no interest in building a portfolio because he wants the income immediately, to help improve the quality of his retirement. Therefore, he should be focusing on investing in properties that offer high rental returns and which will always be tenanted.
Here lies one of the crucial factors of investing in student property which many investors forget to take into consideration:
What does student property offer? Student property offers high, secure returns that are often guaranteed by the developer. Does student property offer discounts so that it can be sold for a profit at a later date? No. The only person you can sell a student property to is another investor who will be pushing you for a cheap price. Therefore, student property does not suit the investment criteria of Investor ‘A’ because he will not be able to grow his portfolio over time. However, student property is ideal for Investor ‘B’ because he wants to ensure he gets a high level of secure income. He is not concerned about selling for a profit, because he has no intention of doing so - it was never his end goal.
In conclusion, student property is a reliable form of investment that offers high annual returns but building a residential buy to let portfolio will deliver better longer term returns. A successful investor must first ask themselves what they are hoping to achieve from investing in property.
