COMMENTARY: Why you should NEVER Buy Student Accomodation
Summary: Student accommodation is a niche residential property investment that may not always bring good returns. Whilst there may be exceptions to whether it is a good investment, we generally discourage investors from buying student accommodation for various reasons. This blog post will explain why you should avoid student accommodation
Why you should not entertain student accommodation properties
Firstly, if all avenues to collect rental have failed, you or your family cannot live in it. We advise people never to invest in properties that you cannot live in yourself, because if all else fails, you would be having an empty apartment or house, left to rot.
Most students are not good tenants
Do you remember your student days? I hope you do, because you should know students in general have a bad record of maintaining the properties they rent. Students rarely are capable of keeping the maintenance of the property top notch. Just think of frat parties or exam times. It is families that maintain properties best.
Some student accommodation sales are scams
We were recently in Brunei where a client informed us she invested in student accommodation in Britain. It was a heritage building, had rental guarantee near the CBD and only cost £50-60,000. So what went wrong?
Firstly, an inner suburb apartment, not even an inner city apartment cannot be so low priced, even in local currency, if it is in a major, high population city. It is just not possible. The client paid peanuts for that property.
So what did the client actually get? With that pricing, the client only got a leasehold over the apartment. In other words, she did not even own the apartment, she was leasing it and having it subleased to students. There cannot be properties that cheap in local currency for any major bustling city.
There was a 10% rental guarantee, but that disappeared after two months. If this happened in Australia, the ACCC alone would be breathing down their neck for false advertising.
Furthermore, the developer, the freeholder, made finding renters difficult by shutting down electricity and other amenities, especially in common areas. The developer's motive was to force the leaseholder to sell back to the developer at rock bottom price.
Do not fall for student accommodation sales, scam or otherwise. Invest in something more solid with better return. Do not be a victim of nightmare tenants or stories too good to be true. Buy Australian property, the right type of property with confidence.