Investing in student property in major university towns in England is a highly profitable direction, so by now a strong demand for residential properties in the student residential sector has formed already. The fact is that in cities such as Liverpool, Oxford, Manchester, Cambridge and Sheffield a constant influx of foreign students is observed who need a place to stay. This provokes a strong demand and increased competition between buyers. The demand for real estate in cities often exceeds the market average competition in London (12.1 buyers for the object). As a consequence, the market sales prices, as well as rental prices are rising fast.
A group of analysts from Knight Frank investigated the growth of rental rates in such cities as Oxford and Cambridge, and it was found that the rent has increased by 170% and 160%, respectively. These figures are considered in comparison with the growth in rentals in other cities out of a radius of top universities.
Thus, the main prospects of investment in student property lies in the steady demand due to the influx of students globalisation; intense price growth in sales, which is higher than the average market value growth rates have equivalent objects; minimal risk and a quick return of capital. The average investment in student property sector will pay for themselves within 1-2 years, the net profit can be obtained from both the rental and transactions on the resale.
The procedure to conclude the agreement with developers
When buying student property investor should enter into a contract with the developer. To reserve object investor pays a deposit in the initial phase of construction of real estate. This would require a £5,000 on deposit – this would amount to a part of the total price of the object. After the expiry of 21 days the buyer and the developer exchange contracts. In parallel to this, the investor contributes an additional 50% of the project cost. After this operation, the buyer becomes the rightful owner of the property, and completes the payment of remaining 50% by the end of construction time.
Investors are thus reliably protected from construction freezing. If the complex is not launched on time (the delays of more than 6 months), the client is compensated for their investments. Development company will pay the full amount of investment, namely, the initial payment of 50%. This condition is spelled out in the regulatory legislation of Great Britain. The legal services are covered separately by the investor – the work of conveyance solicitors will cost you up to 0.6% of the total cost of the premises.
How operation management companies function
Once the complex is put into operation, the apartment owner signs a contract with the management company. The competence of the manager will be to search for tenants with stable solvency. Also, the management company will follow the property status, terms of payment of utility bills, etc. The potential annual yield of the owner will vary between 6% – 9% in this case. The contract with the management company is typically reissued on an annual basis.
The average yield of apartments handed over to rental use, is exceeding 6% per annum (according to a typical contract investor receives net income at the end of each quarter). Due to intensive growth in the long term lease the investor’s annual yield is expected to increase.