Investing in Buy-To-Let Student Accommodation

What you need to know to invest


More than 70,000 South Africans are starting university this year (excluding UNISA correspondent students). The lucky ones are able to commute from home or have found places in university residences or have already sorted a year’s lease on digs but the rest are still hunting for accommodation before orientation weeks begin later this month. 

The demand for student accommodation has risen steeply and universities are unable to meet the demand via student residences. This has opened up a profitable niche in the real estate sector for buyers who purchase solely to let to the student market. We look at some of the advantages of buying-to-let market.

In 2017, UCT recorded having 28 185 students (with 6 753 living in the residence system). Around 4 200 new first-years are accepted to study at UCT every year. This high demand for student accommodation in and around the Southern suburbs has created a unique opportunity for student accommodation to satisfy the current undersupply that exists. Safe, convenient accommodation that is close to amenities is first prize for students and young professionals.

Online is the best place to start looking. Gumtree SA has more than 1200 listings across the country specific to student accommodation and plenty more that could be relevant for this market. Claire Cobbledick, GM-Director of Gumtree SA, has some tips to make the search easier.

Understand student needs

  1. Research the most popular student areas for your varsity and narrow your search to those suburbs.
  2. Find some other people from your varsity who are also still looking and join forces – it’s often easier to find a whole property for rent than it is a single room.
  3. Use price comparisons to establish fair value but understand that Cape Town, Stellenbosch and Pretoria are always going to be more expensive than P.E. or Pietermaritzburg.
  4. Make sure you know exactly what’s included in the monthly rental (electricity, water, wi-fi, security etc.) so you can compare prices properly.
  5. Understand the full cost picture – a cheaper rental far away from campus might cost you more in the long run because of greater transport costs, and you’ll find it harder to participate in varsity activities.
  6. Always inspect the property and check the lease thoroughly (including which services are included) before signing.
  7. Don’t act out of desperation – if you can’t find anything within your budget then opt for some kind of short-term arrangement and then look out for gaps to appear in residences or established digs as students either don’t take up places or start to drop out.

Year-to-year occupation

One immediate benefit to buyers is that their properties are occupied by tenants on a year-to-year basis. This is perfect for the owner who doesn’t want to be tied into a longer lease term than necessary. Having a yearly lease also helps with annual maintenance of the property and allows for easier control of any potentially problematic tenants. Annual renewal also allows new clauses to be added into lease agreements yearly and for the lease agreement to evolve to best suit your situation. This type of letting is much more flexible and allows property owners to adjust rent as the market evolves, without being locked into a fixed percentage annually.

Location matters

Investing in a secure setting like a security complex or sectional title development gives any tenant a feeling of security and will justify paying a bit more for the rental property in the long run. This also keeps demand for your property high and allows your property to remain competitive year-on-year despite prevailing economic conditions.

Investing in a property that is close to major access routes along which the Jammie shuttle travels or within easy access of educational institutions is always a prudent move. This is a desirable feature that can be listed when advertising the property to let. Parents who are leasing homes for their children want the peace of mind knowing that their children will be safe and able to easily get to their institutions of learning with as little hassle as possible. Access to a bus route also means that parents don’t necessarily need to spend the additional cash on a car as well.

Investing in property for the sole aim of letting to students has many benefits provided that your tenants are properly vetted prior to occupation. There is a constantly growing demand for accommodation close to institutions of higher learning and amenities related to them. This form of letting produces an excellent return on investment and can be a steady income stream should you embark on it.

SOURCE:Greeff Properties; Gumtree





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