Buying

Investing in student accommodation: the pros and cons

Investing in student accommodation has both its pros and its cons but there is one truth to this form of investing that sits smack bang in the middle. Investing in student accommodation is a yield game. You won’t find your investment generating huge increases in capital gains growth, in fact it may remain stagnant in its value, but you may see reliable and strong yield results. This can be a pro or a con depending on a variety of circumstances. However, there are a range of other benefits to student accommodation that may tip the scales towards making this a viable investment for you.

Pro
Con
Student accommodation often results in a higher rental yield than renting to professionals. You may not be able to avoid management fees if they are contractually linked to the investment.
With Australian universities attracting high numbers of international students, there is a high demand for your property and less risk of being left without an income with your investment. You will often experience a high turnover of tenants, making it harder to stay on top of the reliability of any given tenant and how they treat your property.
With student-specific accommodation, you can often enjoy support from universities in finding tenants. You may not want to live in the investment, which means you may not be able to make the most of tax concessions for investors.
If it suits you, many properties provide management services, ensuring the upkeep of your investment. Whether this is bad or not, lower capital growth in student accommodation may mean that it works in your favour to pay it off quickly. This may be a con if it places financial pressure on you that goes beyond an acceptable risk.
High yield can be an attractive incentive for older, experienced investors to use as cash flow rather than selling and living on capital gains. There is a risk you may find it harder to communicate with international students who don't have a strong grasp of English.
Students living close to university often don't require, or can't yet afford, a car. This means you do not have to provide a car space. Holiday periods, which are extensive in the university calendar, may leave you without a source of income.
There is sometimes the opportunity to increase your yield if there is enough room in the property to increase tenant numbers.
Student accommodation is a low-cost entry point for budding investors and as such low-risk compared to other property investment options.
Comparing student accommodation to regional investment: similar cost but less risk than regional investment, which relies on the growth of rural/regional economies to make an investment viable.