Investing in student property doesn’t stack up

Don’t be fooled by the attractive yields from investing in student property: the market doesn’t live up to the hype.

College students moving in dorm
(Image credit: svetikd)

Type "invest in student accommodation" into Google and the search results seem compelling. Advertisements claim that in return for a relatively modest sum you can achieve guaranteed returns of anything from 7%-10% a year on a fully tenanted, fully managed buy-to-let investment. But investors should do their homework before parting with their money. Behind the glossy advertisements for purpose-built student accommodation lie high-risk, illiquid investments.

The student "pods" advertised to "savvy" investors are usually top-end, en-suite studios in buildings offering residents services such as high-speed broadband, gyms, cafes, and cycle storage. Buildings tend to be in city-centre locations with units appearing cheap compared with other properties in the same area. But the first problem investors might encounter if they want to buy one is that most mortgage lenders won't lend on pods. "If a bank doesn't think it's a safe bet, then you should stay well clear," says Robert Bence of the Property Hub forum. "The reason they won't lend is that if they had to repossess a student pod they wouldn't be able to sell it."

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Emma Lunn

Emma Lunn is a multi-award-winning journalist who specialises in personal finance and consumer issues. With more than 18 years’ experience in personal finance, Emma has covered topics including mortgages, first-time buyers, leasehold, banking, debt, budgeting, broadband, energy, pensions and investments. Emma’s one of the most prolific freelance personal finance journalists with a back catalogue of work in newspapers such as The Guardian, The Independent, The Daily Telegraph, the Mail on Sunday and the Mirror. As a freelancer she has also completed various in-house contracts at The Guardian, The Independent, Mortgage Solutions, Orange and Moneywise. 

She also writes regularly for specialist magazines and websites such as Property Hub, Mortgage Strategy and YourMoney.com. She’s particularly proud of her work writing about the leasehold sector and a Guardian front-page story about a dodgy landlord. She has a real passion for helping people learn about money – especially when many people are struggling to get by in today’s challenging economic climate – and prides herself on simplifying complex subjects.