How to Invest in Student Property in 2022

Daniel Williams

Senior Property Writer

7 Min Read

Looking to find out how to invest in student property or how to invest in student accommodation in 2022?

You’ve come to the right place.

In this guide, you will learn about the two most popular ways you can start investing in student property today.

You will learn:

What is an HMO?
What is Purpose-Built Student Accommodation?
Pitfalls of Investing in Student Accommodation
The Pros and Cons of Student Property Investment

If this sounds good to you, then keep reading to learn more.

This guide is one of seven blogs in our student property investment series. You can check out our full series by clicking the link.

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How to Invest in Student Property UK? (Two Ways)

Student property investment is currently one of the most popular ways to invest in real estate in 2022.

With over 2.4 million students in the UK, according to UCAS, and a further 500,000 students to come to the UK by 2030, the market is primed for real estate investment.

With a record number of UCAS student applicants in 2020/2021, and a stunning 88% of students living in student accommodation according to the National Student Accommodation Survey, 2022 is one of the best times to invest in student buy to let.

Prices for student property tend to be far lower than traditional residential property due to smaller sizes, making rental yields some of the highest available in the UK.

It’s clear that investing in student accommodation is a good idea, but how can you invest in student property to take advantage of this huge market?

Well, there are currently two popular ways you can start buying student property investments today.

They are:

HMOs
Purpose-Built Student Accommodation

Let’s look at both in detail so you can see exactly which student property investment is right for you.

1. What Is an HMO?

An HMO, otherwise known as a house in multiple occupation or a multi-let, is a property that is tenanted by three or more people who are not related.

In the property, facilities such as bathrooms or kitchens are typically shared between tenants, but they will have their own bedrooms.

Generally, HMOs can offer rental yields far higher than other buy to let property types, with low prices and high rental income opportunities from multiple tenants.

The flexibility of multi-let house shares is ideal for students, with most second, third, and final year students being able to share the financial load of living away from home for the first time with their friends.

However, while the opportunity to earn high income sounds attractive, there are some serious drawbacks to HMO investments that investors need to know about before investing.

Unfortunately, in 2022, HMO investments aren’t what they used to be.

Previously, HMOs were comfortably the most popular way to get into student property investment.

However, there has been a culture change amongst students. Now, students are looking for more attractive, higher-quality living spaces with ‘cool’ amenities like onsite gyms and cinemas.

HMOs simply cannot meet this demand, with most HMOs based in older properties due to their size.

Aside from this culture change making HMO investments less viable, there’s also the learning curve attached, which is what we will discuss in the next section.

HMOs are complicated, especially for beginner investors.

This is because there is a tonne of strict legislation surrounding HMOs, on both a national and local level.

You will need licences to operate and convert HMOs, and you also have extra responsibilities to protect your tenants as per The Licensing of Houses in Multiple Occupation Order 2018.

For each local authority, there may be differences in how HMOs are defined, different licensing requirements, and even different planning regulations.

So, how can you find out how to license an HMO and see if you’re meeting the legislation required?

Well, while there is a tonne of legislation in place, there is a simple answer: Speak to the local council, or specifically the local HMO officer.

By doing this, you can find out how to meet the local authorities’ rules on fire safety, room sizes, window fittings, and the number of bedrooms you need in an HMO.

Pros: 

Investors can earn higher rental yields, with more tenants paying rent which means higher returns for investors.
Void periods are less impactful, as if a tenant leaves, there will be other tenants able to pay.
Rental arrears are less impactful, as if one tenant defaults on their payments, other tenants will still pay.

Cons: 

Strict legislation means HMO investment can be incredibly confusing.
When it comes to selling, investors may struggle, as likely the only buyers will be other investors. This lowers the amount of capital growth potential on the property.
In 2022, there is less demand for HMO properties from students, who now want higher-quality properties.
Difficult to secure mortgages.
Higher running costs for HMOs, as they are subject to more wear and tear due to being older properties.
Higher start-up costs than traditional buy to let properties, as you will need to buy more furniture and meet more health and safety regulations.
Fewer property management companies will be willing to manage the property, which means you may have to self-manage the property.

The Problem With HMO Investments

Unfortunately, in 2022, HMO investments aren’t what they used to be.

Previously, HMOs were comfortably the most popular way to get into student property investment.

However, there has been a culture change amongst students. Now, students are looking for more attractive, higher-quality living spaces with ‘cool’ amenities like onsite gyms and cinemas.

HMOs simply cannot meet this demand, with most HMOs based in older properties due to their size.

Aside from this culture change making HMO investments less viable, there’s also the learning curve attached, which is what we will discuss in the next section.

How to Invest in HMO Student Investments?

HMOs are complicated, especially for beginner investors.

This is because there is a tonne of strict legislation surrounding HMOs, on both a national and local level.

You will need licences to operate and convert HMOs, and you also have extra responsibilities to protect your tenants as per The Licensing of Houses in Multiple Occupation Order 2018.

For each local authority, there may be differences in how HMOs are defined, different licensing requirements, and even different planning regulations.

So, how can you find out how to license an HMO and see if you’re meeting the legislation required?

Well, while there is a tonne of legislation in place, there is a simple answer: Speak to the local council, or specifically the local HMO officer.

By doing this, you can find out how to meet the local authorities’ rules on fire safety, room sizes, window fittings, and the number of bedrooms you need in an HMO.

What Are the Pros and Cons of HMO Investments?

Pros: 

Investors can earn higher rental yields, with more tenants paying rent which means higher returns for investors.
Void periods are less impactful, as if a tenant leaves, there will be other tenants able to pay.
Rental arrears are less impactful, as if one tenant defaults on their payments, other tenants will still pay.

Cons: 

Strict legislation means HMO investment can be incredibly confusing.
When it comes to selling, investors may struggle, as likely the only buyers will be other investors. This lowers the amount of capital growth potential on the property.
In 2022, there is less demand for HMO properties from students, who now want higher-quality properties.
Difficult to secure mortgages.
Higher running costs for HMOs, as they are subject to more wear and tear due to being older properties.
Higher start-up costs than traditional buy to let properties, as you will need to buy more furniture and meet more health and safety regulations.
Fewer property management companies will be willing to manage the property, which means you may have to self-manage the property.

Find Luxury Purpose-Built Student Accommodation Today From Only £59,995

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2. What is Purpose-Built Student Accommodation?

Purpose-built student accommodation is property that has been built specifically for students.

This means they are often equipped with modern necessities for students, which ranges from Wi-Fi, working spaces, and security, all the way to onsite gyms and cinema rooms.

Here in the UK, there are two common types of PBSA.

They are:

Cluster flats that have private kitchens but shared living spaces.
Halls of residence that feature multiple bedrooms but shared kitchens and dining areas

Over the last year or so, PBSA has exploded in popularity amongst investors, with cluster flats and premium living spaces, in particular, on the rise.

In 2020, despite the obvious economic pressures caused by the global Covid-19 pandemic, there was more purpose-built student accommodation investment than ever before.

A report from Savills found that £5.77 billion was spent in the sector in 2020, which is 5.7% higher than 2019 and 0.8% higher than the previous record.

While those living in student accommodation fell from 98% in the academic year 2019/20 to 88% in 2020/21 – a symptom of students moving back home during lockdown – these numbers are likely to bounce back in 2022.

UCAS has reported that there has been an 8.4% increase in applications for the upcoming academic year, stemming from a 17.1% rise in foreign applications from non-EU countries.

This rise in foreign applications is particularly interesting and poses a huge opportunity for investors.

According to UCAS, 130,000 university applications in 2021 came from Chinese students, who are around 2.2 times more likely to live in PBSA.

There’s already a huge divide between available beds and full-time students, with full-time students currently outweighing PBSA by 3:1.

Crucially, universities own about 69% of the UK’s purpose-built student accommodation, which is noteworthy as universities are relying on the private sector to help deal with this rising demand for quality housing.

With such a high level of students entering the UK, PBSA investments in cities like Liverpool and Manchester currently rank as the best.

This is because both cities offer some of the highest levels of Chinese students in the UK. In fact, in the University of Liverpool, around one in five students are Chinese, thanks to the cities long-standing history with China.

If you want to learn more about the best places to invest in student accommodation, be sure to check out our free guide.

Or, if you’re more interested in checking out specific cities like student property investment in Liverpool or student property investment in Manchester, you can check out our area guides for them.

Just click the links to read for free!

If you’re wondering how to invest in student accommodation, then RWinvest is the perfect company for you.

We have several fantastic purpose-built student accommodation investments for sale, with huge NET returns available up to 8%.

With prices as low as just £59,995, too, you can secure one of the most affordable asset classes in UK real estate.

To see the latest student accommodation investments for sale, then click the link to see our opportunities.

Pros: 

PBSA is far more affordable than traditional buy to let, with starting prices often below £100k.
If you purchase new build student properties from investment companies, you will often get assured rental yields for a set number of years.
Due to luxury onsite facilities like gyms and cinema rooms, rental income is high in PBSA.
Thanks to highly affordable property prices and high rent, rental yields tend to be incredibly high for student properties, with returns around 8% or more.
Huge demand for PBSA, with full-time students outweighing available rooms by 3:1.
It can be a completely hands-off investment, with a dedicated student accommodation management company usually provided specifically for the development.
With student property investment, you can earn income through both rent and capital appreciation.

Cons: 

Capital appreciation tends to be less than traditional buy to let property.
Small resale market, as those looking to buy student accommodation will be other investors.

Why Should You Invest in Student Accommodation in 2022?