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Unlocking Student Property Profits: Top Investment Tips for 2024

Hey there fellow #StoreTroopers!

I am remembering those hazy days of student life today. Did you know there are nearly three million students enrolled in higher education in the UK annually? Navigating through over 160 universities, the burgeoning need for student-specific accommodation has become more apparent than ever. With such a substantial segment of the UK's population living in student properties during their degrees, it's intriguing to consider student accommodation as a potential gold mine for property investors. But is this really the case? Well, let’s find out, shall we?


What Exactly is Student Property Investment?

Student property investment involves purchasing real estate to rent out exclusively to students. This might not be your cup of tea, but I’m here to give you the low-down. There are several types of student accommodation, including:

  • University-managed halls of residence: Often located on or near campus, these are primarily occupied by first-year students, or Freshers as they are known.

  • University-managed rooms and houses: Similar to private rental properties but managed by the university. These are not really our concern here but good to know about.

  • Privately-owned halls of residence: Known as ‘Purpose Built Student Accommodation’ (PBSA), are like university halls of residence but built, owned, and managed by private investors or companies.

  • Privately-owned houses or flats: Typically found in student-heavy areas, these are the most common type of student housing.


Let’s take a deeper look at these last two options:


Can an individual investor build a PBSA?

The answer is yes. An individual investor can build a PBSA, but it involves considerable planning, investment, and understanding of the market. If you think this might be for you, here’s a general outline of the process involved in building a PBSA:

  • Market Research: Before anything else, thorough market research is essential. This includes understanding the demand for student housing in the area, the location's proximity to universities, and the competition. This step helps determine whether the investment is likely to be profitable.

  • Securing Financing: The hard part if you ask me, building a PBSA requires significant capital due to the size of the project. An individual investor will need to secure financing through loans, investor partnerships, or other financial instruments. Presenting a strong business plan and market research is crucial to gaining financial backing.

  • Acquiring Land: Okay, this is quite hard too. Choosing the right location near a university campus or easily accessible area is critical. The land must be zoned appropriately for the type of construction you plan to undertake.

  • Design and Planning: The design of the building should cater specifically to students’ needs, which means including features like communal study areas, reliable internet access, security features, possibly a communal gym, and even furnished rooms. Hiring an architect experienced in PBSA projects is advisable.

  • Obtaining Permits: Like any construction project, building a PBSA requires obtaining the necessary permits from local authorities. This can include planning permission, building regulation approvals, and environmental assessments.

  • Construction: The construction phase needs to be managed by a professional team to ensure that it meets all legal and quality standards. Bob won’t do here.

  • Management Setup: Once the building is completed, setting up a management team to run the accommodation is crucial. This includes everything from marketing the rooms and managing lease agreements to maintaining the property and supporting the tenants.

  • Ongoing Operations: After the building is operational, ongoing management involves tenant relations, facility management, and potentially updating or renovating spaces as needed to remain competitive.


As you can see, for individual investors, the challenge often lies in the scale of the project and the expertise required at each stage. It’s a considerable commitment in terms of both time and money. Smaller investors might find it more feasible to invest in existing PBSA projects or collaborate with other investors and developers rather than undertaking a complete build themselves. An alternative option is privately owned houses or flats as below.


How about Privately-owned houses or flats?

Why are investors flocking to the student property market? Well, for several compelling reasons, here are just a few:

  • Consistent Demand: The number of students attending universities continues to grow, fuelling a constant need for student housing. This demographic trend provides a stable base of potential tenants each year, which can lead to higher occupancy rates compared to other types of rental properties.

  • Recession Resilience: Education tends to be valued even during economic downturns, as individuals seek to improve their qualifications or delay entering uncertain job markets. This resilience translates to sustained demand for student housing, providing a buffer for your investment against economic ups and downs.

  • High Rental Yields: Student accommodation typically allows for room-by-room leasing, which can generate higher rental yields than renting out a property on a single-lease basis. For example, renting out multiple rooms in a shared HMO can accumulate greater total rent compared to leasing the entire place to a single tenant or family.

  • Longer Lease Terms: Student leases are usually synchronised with the academic calendar, often running for a full academic year, or even longer. This can help reduce the frequency of tenant turnover, lowering vacancy rates and administrative costs associated with re-letting properties.

  • Hands-Off Management: This refers more to PBSA properties, but even privately owned student properties can be part of larger developments that include professional management services. These services handle day-to-day operational tasks such as maintenance, tenant screening, and lease management, making the investment less labour-intensive for the property owner. Although finding a good private managing agent can also do this.

  • Capital Growth Potential: Properties located in prime areas near universities with growing student populations have a strong potential for capital appreciation. As demand increases and available land near campuses remains limited, the value of these strategically located properties can increase significantly. Worth looking at surrounding areas to the university with good transport links too.

  • Modern and Desirable Features: Its worth bearing in mind that newly built or recently renovated student accommodations should offer modern amenities that today's students expect, such as high-speed internet, modern appliances, and well-designed study and social spaces. These features make properties more attractive to potential renters, allowing landlords to command higher rents.


Some Considerations to Mull Over

Despite the attractive aspects of both propositions, investing in student accommodation comes with its own set of challenges:

  • High initial costs: Stepping into the student property market often requires a significant upfront investment. High development and acquisition costs can be a barrier for new investors or those with limited capital.

  • Market saturation: In university towns with extensive development, the market might be flooded with student accommodations, leading to fierce competition. This can pressure rental rates and occupancy levels, potentially reducing profitability for individual landlords.

  • Seasonal vacancies: Unlike traditional residential rentals, student housing typically empties during summer and other university breaks. These off-peak seasons can impact cash flow, requiring careful financial planning and budgeting.

  • Management complexities: Managing properties with multiple individual tenants, each with their own lease agreement, can become intricate and time-consuming. Additionally, the higher turnover inherent in student rentals introduces further complexities and costs in terms of tenant management and property upkeep.

  • Regulatory risks: The student housing market is subject to its own regulatory environment, which can change. These changes may affect everything from rental caps to safety standards, potentially impacting how properties are managed and the profits they generate.

  • University dependence: The viability of student properties is heavily reliant on the local universities. A drop in enrolment, changes in university housing policies, or the construction of new on-campus residences can significantly diminish demand for private rentals.

  • Regional performance variations: Not every student town is created equal. Some areas may see robust demand and property value growth, while others might struggle to attract tenants if local universities face challenges or if there are shifts in student preferences.


So, Is Student Property Investment Right for You?

Only you know that I’m afraid. But planning ahead can help you determine if investing in student accommodation suits your investment goals:

  • Define your investment objectives: Are you looking for steady rental income, or are both rental yields and capital appreciation important?

  • Assess your risk tolerance: Consider the market risks and personal readiness to handle the intricacies of student property management.

  • Conduct thorough market research: Investigate the demand for student housing in your desired area, looking at university growth and enrolment trends.

  • Analyse the location: Properties near universities, amenities, and transport links generally do well. Assess these factors carefully.

  • Plan an exit strategy: Think about how you will eventually sell the property, as the market for student housing can be niche.

  • Consult a property investment specialist: If you are fairly new to this then a seasoned expert can provide invaluable insights and help you navigate the complexities of this market.


A Quick Recap

This niche in the property market focuses on providing housing solutions, that are not only functional and appealing to students, but are also situated in locations conducive to university life. The appeal of investing in student property comes from several unique advantages this sector offers:

  • Steady demand: Lots of students each year means properties rarely sit empty, providing landlords with a consistent stream of tenants.

  • Economic resilience: As I’ve said, education tends to be a priority for many, even in tougher times. This shields the student accommodation sector, maintaining a robust demand regardless of the broader financial climate.

  • Attractive rental yields: It’s not just about filling rooms, although that always helps; it's about the returns too. With rental yields typically 13-18% higher than the market average, according to Paragon Banking, investors can enjoy a healthy profit margin that’s hard to find in other sectors.

  • Longer lease terms: This sector allows for more predictable and stable income streams throughout the academic cycle.

  • Professional management: Whether in the PBSA market or private, full management services means less day-to-day stress for you as an investor, as the professional teams handle everything from maintenance to tenants’ quibbles.

  • Appreciation potential: In thriving University cities where the student population outstrips available housing, property values tend to increase. This appreciation potential can significantly boost the overall return on investment over time.

  • Modern amenities: Remember, today’s students won’t put up with a microwave and a creaky Futon in the corner. Providing a bit of luxury not only attracts tenants but can also command higher rents, enhancing the property’s profitability. Food for thought.


There you have it, while the student property market offers some attractive opportunities, it's not without its pitfalls. A calculated approach, backed by thorough research and professional advice, is crucial for success in this investment niche. Whether student property investment is a wise choice for you depends largely on your financial goals, risk appetite, and the specific dynamics of the local market. Consider all angles before diving in!


Until next time, keep your investment compass steady and your dreams of property prosperity alive!


The Anonymous Investor.

*This blog post is for general information only and is not financial advice. Always speak to a financial advisor for guidance on your specific situation.


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