Investing in student accommodation

Grandscene

Can anyone advise if it's a good idea to invest in student accommodation promising a net yield of 7% per annum?

shimadzu

Are you purchasing a property or a share in the company that will own the properties.

The return is very good if that is indeed a net yield and not gross yield, but with all these thing the devil is in the details so review contracts carefully. Many of these schemes start off low cost but as time goes on more and more operating costs are added reducing income significantly and unless you have voting rights you are often powerless to control the costs.

DubCount

"promising" is an interesting word here. That could be based on certain assumptions on summer occupancy which may or may not happen. Its also based on an occupancy rate that may be impacted if the college is building its own accommodation etc. I reckon you need to dig into their sums a bit. Are there any increases in management fees etc. coming down the line. Ideally speak to other owners etc.

These can be good investments. Just note that 7% is not shooting the lights out especially if you have a mortgage paying say 5%. It doesnt take much to be under water. You might also have negative cash flow.

As a positive, the pooled revenue scheme means you are less open to one bad tenant bringing you to financial ruin. It depends on your objectives for your current money and your long term plans etc.

Speak to a financial advisor - well worth the money.

Grandscene

Thank you for your feedback. I would be buying one ofl the units in the block. And the rents are pooled and shared out to all the owners after costs are taken by the management company. So even after say, paying 40% income tax on the net amount they pay me, it still leaves approx 10k p.a.net income. Which is better than say the State savings scheme which pays 22% after ten years! At the moment the money is sitting in the bank earning no interest. So I'm trying to find the best use I can make of my savings.