The milestone achievement of a child packing their bags and heading off to university will be special for any parent, but it can also be an opportunity to explore some financial planning opportunities by investing in a home for them whilst they are studying, potentially securing a long-term investment even after they’ve left.
What are the benefits?
As the owner, parents can choose the property’s location and quality, ensuring their child lives in a safe environment suited to their needs and preferences, and ultimately helping to ensure they will succeed in their higher education, which is an investment in and of itself.
Compared to paying years of high student rents for properties owned by someone else, investing in a student property can be more cost-effective over the course of a degree, especially if you can rent out extra rooms to other students.
Student properties in the UK have been offering incredible returns for investors, often times better returns than standard lets, and recent research by Paragon Bank found that student buy-to-lets can offer yields as much as 18% higher than on standard rental homes.
What to consider?
There are multiple strategies for parents looking to become student property owners, and the short term option would be to buy a one-bed for only their child, which they can sell on after they leave university. That said, this is not the recommended route for parents hoping to see more returns.
If the owners are planning to only keep the property while their child is at university, the costs associated with buying, maintaining and selling will likely eat into the returns. The buying and selling costs include legal and estate agent fees, surveys, stamp duty and funds to refurbish, which means that buying a property for a short period doesn't make financial sense, and having a long term plan would benefit the property owners more.
Financially it would make more sense to buy a larger property and rent out the other rooms to additional students, generating a rental income which could cover the mortgage payments and provide additional returns. Parents with a longer-term interest in being a landlord could plan to keep the property after their child is no longer studying, meaning they get a long-term income and are more likely to benefit from house price increases when they do come to sell years later.
In fact, in many instances it can be a completely hands-off investment, as plenty of student accommodation has its own attached management company, meaning investors will have no landlord duties.
Student housing attracts a consistent stream of tenants
As the demand for higher education continues to increase the demand for student housing is growing alongside a shortage in rental properties available. University property owners will generally benefit from a predictable tenant cycle, so there’s less chance of risks like long void periods. With university students typically signing fixed-term contracts for an entire academic year if not longer, landlords can enjoy a consistent stream of income, often backed by other parental guarantors supporting their children.
Student property provides higher rental yields
According to a study by Savills, purpose-built student accommodation has consistently outperformed other sectors in the UK property market, delivering net yields ranging from 4.5% to 6.5% in recent years. Investment in the sector reached £3.5 billion in 2024, marking a 13% increase from 2023, and over the past five years, the sector’s annual investment volumes have averaged £4.9 billion, demonstrating its resilience despite ongoing market challenges.
Student accommodation apartments are also generally smaller, so are occasionally available at a much more affordable rate, and the demand for quality student accommodation in prime locations near universities allows landlords to charge higher rental rates if they wish, maximising the potential rental yield.
University cities like Liverpool, Manchester, Cardiff and Edinburgh are among those that are particularly high in demand, offering high rental yields thanks to the respectable universities associated geographically, along with thriving cultural scenes and cost-friendly living for students and young professionals both internationally and from the UK.
Overall, buying and managing student property is not only a strategic way to diversify an investment and property portfolio, it also offers parents a means of supporting and safeguarding their children during a potentially difficult and very fundamental period of their young lives. Tailor my Property has a network of property, tax and financial professionals who can assist with specific property and investment goals in the student sector.
Get in touch today to find out how you can capitalise on UK student property potential in 2025.
Comments