Property investment requires you to know every single last detail to ensure that you are 100% confident with the investment you are making and that it will be giving you exactly what you expect it to. Inexperienced investors, particularly student accommodation investors need to do their due diligence and with that in mind FJP Investment have put together a check list to help you on your way.
Am I going to receive the returns I am expecting?
The first thing to be sure of is that the rental income is going to meet your expectation, over the past few years the average net yield in England and Wales is 5%, so if you do your sums and your yield is above this it would certainly represent an above average investment return, but manage your expectations and remember to take into account your outgoing expenses and maybe periods of no income, this will help you to make sure you are making a good worthwhile investment.
Will the investment give me growth as well as income?
Most investors will look at the longer term when they invest, whilst receiving the rental income they will be looking for appreciation in their investment i.e. capital growth therefore giving the investor a profit when deciding to sell in in future years.
Often investors have a slightly blinkered view when they buy student accommodation, a property may seem like a steal in a particular area but is this an area where students want to live, remember when we were young we wanted to be in the middle of the action, or certainly as near to it as possible as well as close to the University so saving on travelling expenses. So, whilst to an investor a property may seem to be good value but is outside the catchment area for students this will certainly impact on the returns from the property, so this must be key when making the investing decision.
Manchester Student Accommodation Investment
Manchester has firmly positioned itself as the second financial capital of the United Kingdom. This has been shown with the average household income now encouraging demand for super high end residential developments in the very best locations.
Which city is also a major consideration – visit and check out the university cities before making up your mind which city to invest in. FJP Investment has a particular focus on student accommodation investments in Northern Cities of the UK such as Manchester. You may find that a larger investment will certainly give you better rewards in the long term.
How long is the Rental Guarantee of the Property?
You will find companies that will guarantee you a return for a number of years at a certain percentage on your rental investment, this gives you a comfort level, but a word of caution, should the term be just 2 years that would be a concern as an investor should be looking at guaranteed returns for a longer period than this as it shows the developer is confident in the ability to rent the property out.
Why is a property in a particular area being offered below value?
Listen to your gut instinct if a property is priced for sale well below others of the same ilk, ask questions of the developer or the agent as to why, of course if the student accommodation is smaller (some developers / sellers will put as many small units as possible into one building) as this may well be reflected in the lower price or higher price. But always ask the questions and make sure the answers add up.
Costs prior to renting the property out?
Each property is different, and we would all like the property to come ready for a student to move into, but obviously that is not the case, you will probably need to do some work before taking a tenant so ensure you factor those costs into your investment and also the time it will take to do anything that needs doing.
You have choices when it comes to management of the property, one is that you can do it yourself, that would mean you would need to collect the rent weekly (obviously the best way with students) you will also be on 24 hour call when the toilet is blocked and you have to find a plumber at 2 am or you could use a management company and sit back and take the rent, however, management companies can be costly and they will call out the plumber for you, but will it be more costly than yours? Do your homework again regarding this issue it could end up costing you either a lot of money or a lot of stress – you make the decision.
FJP Investment is a property investment company sourcing a wide range of investment opportunities both in the UK and overseas.