InFocus: Buying right in student rentals

Buying right is key to successful investing in student rentals. But so is having the right processes in place to maintain its value. Tim Collins from Student Rental Investing shows how investors can make the big returns on investing right.

With the student rental market, buying in the right area in the first place is critical.  If the house isn’t in a prime location, you will constantly find it hard to fill.  This will ultimately result in either vacancies or you having to lower your monthly rental price, neither of which is desirable. Buying well and not overpaying is going to be the best way to maximize returns.

Often in the student rental market you will see turnkey type properties that are ready to go.  Someone else has already bought it at a better price, pumped some money into renovations and now looking to cash out. I tend to look for properties that need some work done, often this is purely cosmetic but it makes a big difference in perceived value. To protect your return, you should understand what potential large expenditures are coming up. I typically look at the main components of a house (roof, furnace, foundation, windows) and then build any deficiencies into my projections.

The main obstacles for this investing strategy are typically around management. Investors need to market and attract the right type of student tenants (and ensure they are students) for your house.

Unlike single-family homes where inspections are rare, student houses need to be checked on regularly. If you can determine that you have a mature group that are clean and are maintaining the house well, then you can likely have longer gaps between visits.  But with a new group that’s not paying enough attention to cleaning and garbage removal, things can go downhill fast. It’s important to be visible and keep an eye on things.  Obviously, if you are doing detailed inspections of any kind then notice should be given to all tenants as usual.

If the above factors are managed well, the returns with student rentals can be strong.  A house that would typically rent for $1,600 to a single family could rent for up to $3,000 per month to a group of students.

There are some very run down student rentals due to the fact people are drawn in by the increased financial potential, but then do not invest in management or maintenance. We expect every year to have to do some updates on each property (typically in the summer when the students aren’t there).  I believe that slum landlords lose out in the end because at some point people just won’t live in poor conditions, even if the rent is cheap.  On the plus side, our nicer houses can maintain full occupancy and command a higher rental price.

***Select Property Group is the UK’s largest retailer of investment property. With more than 9,000 properties sold in over 100 countries, the Group has a well-earned reputation of delivering successful investments in both emerging markets and also through the identification of niche opportunities in more established markets. With over ten years’ experience, the Group’s success is built up on a clear vision to develop market leading brands that are instantly recognisable and cannot be replicated. Underpinning each brand is an unswerving commitment to the end customer, delivering products which are relevant, authentic, and different. By adopting this approach the Group guarantees occupancy levels in its properties, thereby driving the yield and value of its investments.  
Click here for more information on Vita Student’ latest development in Newcastle – Savills’ 2014 UK Investment Hotspot

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