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Purpose Built Student Accommodation: what happens after 10 years?

Student property investments 10 years
Feb 15, 2016

Buyers of our student accommodation properties receive 250-year leasehold ownership, with a fixed income contract for the first 10 years. After 10 years, buyers can choose between three attractive options.

 

1. You can choose to sign a new contract with the developer

The fixed income contract is profitable for the developer, who benefits by maximising demand and ensuring annual rental income growth.

They will therefore want to offer terms that are agreeable with the buyers after 10 years. The developer will offer you a new fixed income contract based on the property’s rental income at that time.

Student sector rents have consistently increased by 3-4% annually since 2000, with 3.5% growth recorded in 2015 (Savills). They will be keen to continue the mutually beneficial relationship and, with other attractive options available to you, will have to make a competitive offer.

You can reject the developer’s terms, with the other two options enabling you to still benefit from the onsite management team for a fixed service charge.

Purpose Built Student Accommodation

 

2. You can hire a local company to rent out your property

Estate agents and specialist management companies would be happy to work with you, since the demand for student room rental is so high, making student accommodation straightforward to tenant and profitable.

 

3. You can choose to personally let out your units

Advances in web-based technology have made this task easier, and there are a number of lettings websites popular with students. This option enables you to maximise the benefits of the consistent high rental growth the sector has experienced for a number of years.

If you’d like to learn more about resale or discuss which option would be best for you, simply get in touch with us!

 

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4 Comments
  • Default Avatar

    Din Kad - 22/04/2017

    How is the rental return guarantee protected in the event that the management company/developer cease trading?

    Reply
    • Emerging Property Avatar

      from Emerging Property - 13/06/2017

      Moderator

      Hello, Din – in the hypothetical situation where something were to happen to the developer or the management company, you the investor would still be the owner of an income-generating property.

      This would put you in charge of the full variable gross income in the future. You would, of course, be exposed to market risk and costs, but the property could remain fully managed remotely by an existing or new management company. These properties are very desirable to a host of local management companies who would be only too pleased to organise the rent of your room, part of the block or the entire block. In fact, this could even mean you’ll be earning marginally more than the agreed NET income, especially as rental income increases.

      But as we’ve said, this is a hypothetical situation; we currently have 19 successful operational properties, and our partner developer has in excess of £29 million of clean and clear assets with no debt. So everything is in very good shape, and while it’s good to consider the worst case scenario, it’s highly unlikely to come about.

      I hope this helps.

  • Default Avatar

    Sakuna Siegenthaler - 28/01/2017

    I would like to learn more about resale of units purchased

    Reply
    • Emerging Property Avatar

      from Emerging Property - 31/01/2017

      Moderator

      That’s a good question, Sakuna – it’s always really important to understand your resale options before buying any asset. You can sell your property at any time during or after the initial fixed income period, and buyers will be attracted to both the high NET income and proven performance. Because our yields are the highest in the sector, they’re highly sought after on the resale market. We can help advise you on your capital growth targets and, with our large global client database, typically complete the sale within 4-6 weeks.

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