Why a Buy-to-let property may not be as suitable as a student property
Housing-Market / Buy to Let Apr 20, 2015 - 09:44 PM GMTBy: Submissions
Pure Student Property writes: The new pension changes will mean that anyone over the age of 55 will be able to access their pension and will not have to buy an annuity. This leads to the belief that the buy-to-let market in the UK could offer high returns for those who are newly retired, however, this may not be true for everyone as student property could be more suited to others.
When it comes to the price of a buy-to-let some may not have a pot large enough to purchase the investment and people should be aware that only 25% of the pension is free from tax. However, some may opt to put down a lump sum as a deposit with the potential of using a buy-to-let mortgage to purchase the property. Regardless of this, the interest rates on buy-to let mortgage are often higher than a standard mortgage for a residential property.
An investment in purpose built student accommodation (PBSA) is a simple case of making a cash purchase outright. This means that the property can be sold at any time and the prices are often a lot lower with prices starting at £60,000
Managing a buy-to-let property can lead to more work than people realise or want. Property can get damaged and is one of the main reasons behind disputes between the landlord and the tenant. There is also the costs involved such as marketing, letting, managing and maintaining the property which can all eat into the profit which can lower retirement income.
It is often the case that a PBSA is managed fully, which means that a management company often maintained and tenanted. This removes the time constraints associated with owning a property.
The returns from a buy-to-let are what pensioners will used to support themselves if they decide to make an investment in property. The yields are worked out through taking the rental cost and then deducting any other costs such as repairs and the mortgage repayments.
A student property is now classed as the best performing asset in the UK. The returns are higher than those seen in a standard residential investment with the yield being around 7%. One incentive is the fact that many providers offer a guaranteed yield for a defined number of years.
The buy-to-let market is currently growing and expanding and there has been an increase of 75% in the private rented sector in the last ten years with more than 4 million households renting. However, a property without a tenant will not return a yield therefore marketing is crucial
Higher Education in the UK is booming, and numbers are at record highs. There is a real undersupply in the UK when it comes to PBSA which means that there is a demand that has to be met and in the last three years there has been £6 billion of investments made in the sector. Universities, from this September, will be able to enrol as many students as they wish, meaning that those properties located near to Russell Group Universities are likely offer returns for many years to come.
Author Bio
Pure Student Property are experts in the UK student accommodation investment market, with a large number of high yield investment opportunities in the biggest university towns and cities in the UK, including Nottingham, Manchester, Sheffield and Liverpool.
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