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Student accommodation investment trends

BMT team — Thu, 28 Feb 2019 22:14:54 +0000

When you purchase a property and rent it out to university students, you can often get a higher-than-average rental yield for the area. According to the Knight Frank 2018 Australian Student Accommodation Insight Report, a number of property investors have already entered the student accommodation market and are successfully building portfolios. The report shows student numbers are rising in Australia. International students in particular are having a direct positive impact on national and state economics. For those considering a student accommodation investment, we’ve looked at the benefits and risks associated. In this article we will look at: Numerous leases result in greater rental returns Multiple leases could result in higher property management fees and periods of vacancy Entry prices for student accommodation can be more affordable Ensure you are adequately covered for damage Increase your cash flow at tax time by claiming depreciation Numerous leases result in greater rental returns It can be confusing dealing with numerous leases for the one property at the same time, but the higher economic return for student accommodation often makes the extra work well worth it. The Frank Knight Report shows student rental properties net between six and eight per cent for inner-city residential property close to educational institutions. By organising multiple independent leases of unrelated tenants, you could receive a significantly higher rental return. For example, a student rental property could accommodate five tenants in a building which would normally house one family on a single lease. Another advantage of having multiple income streams from more than one lease is if one tenant leaves, there are others still paying rent. Multiple leases could result in higher property management fees and periods of vacancy While rental yields are much higher for student accommodation, it’s important to be aware property management fees could increase. For student accommodation, these fees sometimes reach up to 10 per cent of the total rent. There’s also the stress of possibly having no tenants in the property when summer holidays start. It’s worth considering having fixed-term leases in place, so if students want to leave during a particular period, like at the end of the school year, they understand they still have a lease and they will be required to continue paying rent. Lease terms are typically aligned with the major intake periods, which are January to February and June to July. Entry prices for student accommodation can be more affordable A student accommodation investment can also provide a low entry-priced property in CBDs and metropolitan areas. Rents per square metre are very rewarding and there is an increasing trend towards self-contained living, with studio or one bedroom apartments. Unilodge, an Australian student accommodation placement organisation, says while most investors think being close to a university is a must – this isn’t necessarily the case. Generally, students who live in suburbs further out are later in their degree, earning more money, with a bit more understanding about their environment. Unilodge suggests shared accommodation arrangements, with one or more ensuites, are a big plus for investors. Smaller households, affordability and a diversity of housing choice are also in high demand. Recent research conducted by Unilodge advises the greatest occupancy demand is predominately in the $170 to $225 per week per room range, with the past twelve months the average rental arrears was less than two per cent. Ensure you are adequately covered for damage The trickiest problem for landlords who own a student accommodation investment property is an increased likelihood for damage to occur. It is important to ensure you have adequate home and contents insurance and to know who to pass costs onto. With common areas, it can be difficult to work out who is at fault, making it harder to work out which policy the damage applies to. For this reason, most landlords have the same insurer for home and contents insurance BMT Insurance and lodge the claim against the house. Increase your cash flow at tax time by claiming depreciation According to the Student Accommodation Association, students want to be able to move straight into properties without having to buy anything. They expect security screens, locks on bedrooms doors and internet access in all rooms. Preferably rooms should be fully furnished, with a desk, chair, bed, lamp, bin, drawers and hanging space. This may cost more to start with, but fully furnished accommodation has plenty of benefits around tax time. There may be more favourable depreciation deductions for owners of student accommodation properties at tax time than a normal rented property. Before buying a student accommodation investment property, contact the expert team at BMT Tax Depreciation on 1300 728 726 to help you make an informed decision about the most suitable property for you investment and to discover what deductions you can claim.

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Student boom benefits Developers and investors

Bradley Beer — Wed, 22 Mar 2017 00:09:02 +0000

Research suggests that an increase in student numbers is creating opportunities for Developers and investors to build and invest in student accommodation in Australia. Figures released by the Australian Bureau of Statistics in November last year estimate that more than 3 million people aged fifteen to sixty four were enrolled in formal study. Of these numbers, 1.2 million people were aged fifteen to nineteen years old and 741,100 were aged twenty to twenty four years old. Similarly, the Times Higher Education World University Rankings reported that there were nearly 650,000 international students in Australia, a 12 per cent increase on the previous year. Much of this growth could be attributed to increased enrolment of Chinese students, who now account for 27 per cent of the Australian higher education market. Student numbers in Australia look likely to increase in 2017, as the International Education Association of Australia predicts we’ll see a further influx of international students following the election of Donald Trump in the United States of America and the impact of the United Kingdom’s Brexit from the European Union. Data from a JLL Student Accommodation Market Review also sees global growth of international students increasing from around 4.5 million currently to between 7 million and 8 million by 2025. As student numbers increase across Australia, particularly in the capital cities, demand for suitable housing grows. This has resulted in a number of global property Developers investing in student accommodation. Savills research indicates that more than $2 billion of capital has been earmarked for development projects in student accommodation since the beginning of 2015. The Savills Student Accommodation Report 2016 notes that a number of universities have been active or have commenced on-campus projects including the University of Western Sydney, Queensland University of Technology, Australian National University, the University of South Australia, Curtin University and the University of Melbourne to name just some. Strong growth in private sector proposed developments was also indicated in the report. For those thinking of investing in student rental accommodation there are two choices available; investing in purpose built student accommodation apartment blocks and investing in properties located in nearby university precincts which are often rented on a room by room basis. Choosing to invest in either of these options provides owners with a number of added benefits including above average rental yields, improved tenant demand and even a reduction in the chances of rental arrears as many students accommodation is subsided by their parents who often choose to pay ahead in advance. Another advantage of owning and renting out student accommodation is the depreciation deductions the owner is eligible to claim. Owners of any income producing property are entitled to claim depreciation for the wear and tear which occurs to a buildings structure and fixed items as well any of the removable plant and equipment items contained. Often student accommodation is furnished and therefore has more plant and equipment eligible to be depreciated. As a result, this can mean higher depreciation deductions for their owners. Below is an example of the depreciation deductions investors could claim for two types of student rental properties. The first scenario is for a one bedroom student apartment block constructed in 2006. This property was purchased for $360,000 and is located in Carlton, Victoria near the University of Melbourne. The owner of this property receives a rental income of $550 per week or $28,600 per year. The second example is a thirty year old fully furnished house located in North Lambton near the University of Newcastle. The seven bedrooms are rented as share accommodation for $155 each per week for a total rental income of $56,420 per year. Property investors are encouraged to contact a specialist Quantity Surveyor who can provide a comprehensive tax depreciation schedule outlining the deductions they can claim from student accommodation. Before making a purchase it is also recommended to speak with a financial advisor and an Accountant. You should also consider some of the potential cons of renting student accommodation such as frequent turnover of tenants, vacancies throughout student holidays and potentially an increase in maintenance and repair costs due to increased wear and tear or damage. Student accommodation can be a very lucrative investment with the right advice, so it’s important to do your research and to discuss your strategy with the help of the relevant experts. Article originally published online at https://sourceable.net/. To view the original article, visit https://sourceable.net/student-boom-benefits-developers-and-investors/

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