Should We Invest in Student Accommodation?

June 24, 2022
invest in student accommodation

The main consideration when it comes to student accommodation investment is how much yield you will see and if it is worth it. 

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Designated student accommodation

Designated student accommodation apartment blocks are strictly used for student accommodations. Some blocks do allow for owner-occupation by non-students.

This type of investment is typically a yield play for investors. Student blocks bring about a great yield with the addition of on-site management to deal with day-to-day chores. This, of course, reduces how much work you have to do. 

For example, in finding a student apartment in the centre of Melbourne, it was on the market for $185,000 along with a rental return of $310 each week. This is an 8.7% return with a fairly low entry cost.  

Although this is one example of the benefits of student accommodation investment, by doing a little research, you can find tons of similar testimonies. With this kind of yield, people just getting into the investing world can find success just as an experienced investor could. 

Normal investment property

invest in student accommodation

Normal investment property is a bit different. They are located in university precincts, meaning that you will pay a regular market price to buy them, but you have the power to enhance your yield by renting fully furnished and room-by-room. 

Normal investment property answers the question of can you make money with student accommodation?

There are typically nearby suburbs in university towns that are fairly popular due to their proximity to the designated university. This is where you can get creative.

For example, a four-bedroom house that was bought at $300,000 in 2010 can be rented room-by-room and fully furnished for $190 each week, which gives a potential yield of approximately 10.5%. 

These are significant numbers that you may not be able to find when investing in other kinds of properties. A high potential yield is the main reason why student accommodation investment is a great choice for many investors

Is student accommodation a good investment?

Student accommodation investment has a long list of pros and cons, so the ultimate decision should be based on your own preferences when it comes to investment properties. The fact of the matter is, though, that student accommodation investment is a yield game. 

Do not be surprised if your investment doesn’t seem to generate significant increases in capital gains growth. On the other hand, you may come face-to-face with reliable, strong yield results after investing. 

There are many factors that influence whether it can be determined as a ‘good investment,’ which is why it is important to research the advantages and disadvantages of taking such a path. 

Is student accommodation a good investment? This question can only be answered by you and your priorities. 

Pros of investing in student accommodation

Something you may see when investing in student accommodation is a higher rental yield as opposed to renting to professionals. There are more international students attending Australian universities, which creates a higher demand for your property while presenting less risk. 

Student-specific accommodations also bring about support from universities to help find tenants to fill your rooms. Along with this advantage, properties may provide management services, which ensure that the upkeep of your investment is regular and reliable. 

In the case of more experienced investors, a high yield is a good incentive to use as cash flow instead of living just on capital gains. 

Another sneaky advantage of a student accommodation investment is that students rarely have cars since they live so close to campus. This means that you will not have to provide as much car space as you would in the case of other properties. 

There is also a low-cost entry point for those who want to get started in the investing world along with low-risk.   

Cons of investing in student accommodation

invest in student accommodation

As for the possible disadvantages of a Unilodge investment, you may not be able to skip out on management fees since they will likely be linked to the investment. You can also expect a high turnover of tenants each year, which makes it a bit more difficult to cheque the reliability of each tenant properly and effectively. 

If you were to cheque a student accommodation investment review, you would find that a significant complaint is that it is unlikely for investors to live on the property, which means that you may not be able to benefit from tax concessions.

Lastly, you may find yourself without a source of income during holiday periods when most students would be moving out, out of their accommodation, and difficult to reach. 

Importance of yield and capital growth

invest in student accommodation

It is important to remember what is necessary to consider when choosing to invest. Pursuing student accommodation involves knowing the differences and potential profits from investing in normal residential properties or designated student accommodation.  

Typically, normal residential properties result in better long-term capital growth. This is because the property holds the possibility of being sold to owner-occupiers at a later time. 

Whoever chooses to buy student apartments in student blocks tends to be limited to investors, which means that your ability to achieve capital growth will be naturally restricted because of an inherent lower demand

At the end of the day, though, it is important to consider all options before diving into a venture such as this one. What works for everyone else may not be the path meant for you, so it is important to consult financial and tax advisors at the first chance you get. 

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