The Untapped Investment Strategy
According to the Australian Bureau of Statictics, in 2013 there were approximately 330,000 International Students and 980,000 Domestic Students, yet the availability of Purpose Built Student Accommodation (PBSA) bed supply was only 58,000, a mere 4.4% of this demand. Clearly there is a latent opportunity to invest in this sector for the Savvy Investor
Australian Student Accommodation Industry Update 2015
A recent report by JLL into the Australian Student Accommodation Industry has again reported that Purpose Built Student Accommodation (PBSA) is in considerable under supply, this despite a number of larger players coming into the market to take advantage of large incentives provided by the likes of Brisbane City Council and others who have dramatically discounted the cost of Infrastructure Charges for PBSA supply.
Student Accommodation Industry Statistics
Few people are aware that International Students living and studying in Australia contributed $16.3 Billion to the Australian Economy, so much so that International Students are the third largest export commodity from Australia behind only Iron Ore and Coal. As significant as the International Students market is (approx 330,000 students), they only account for approximately 1/3 of the total Tertiary Student market with Domestic Students accounting for a further 980,000 (approx) positions within higher education institutions. Whilst many of the Domestic Students will stay at home with family, there are still only approximately 58,000 Purpose Build Student Accommodation beds across Australia leaving a MASSIVE shortfall and the opportunity for a new class of Investment Stock to be considered by investors seeking positively geared property with minimal risk.
Student Accommodation as an Investment Strategy
The Utopian goal of most investors is owning positively geared stock, and renting on a per room basis such as this allows for an overall higher yield, turning many existing negatively geared properties into positively geared if located appropriately close to a major university. There are other benefits too, such as if a tenant leaves then you do not lose all of your rent, instead only a portion of it.
What makes a good property?
- Walking distance to University
- Walking distance to shops
- Close to public transport
- No more than 3 people per bathroom
- Room for study desk
- Ensuites add value to rooms
- Size of Room
Must have Inclusions
Students are looking for a complete “Turn Key” solution with all services and amenities being supplied under a single weekly rental fee. This means that there are extra services and costs associated with running the facility, but these are more than offset by the additional premium typically charged.
- Fully furnished with Bed, Lamp, Bin, Study Desk, Wardrobe, etc
- Rental should includes all utilities (i.e. Electricity, Water, Gas, Rates, etc)
- Regular maintenance plan with minimum fortnightly cleans of all common areas, gardening, etc
- House rules stipulating acceptable behavior and obligations for living in a shared house
- Internet is a mandatory, with students heavily reliant on online lectures, social media and other services
- Extra fridge space is highly recommended so that each tenant can have their own dedicated fridge space
- Additional bathrooms are a preference, with no more than 3 tenants sharing a bathroom recommended.
To ensure success
- Make sure you have a decent property manager who specialises in rent per room accommodation
- Have a mix of student nationalities, this will ensure that all tenants mix socially with each other
- Look after your tenants – They are your income
- Keep your property in good repair
- Regularly clean common areas and gardening
- Know your obligations
- Fire Management
This is by far the most critical element to supply from a legal point of view and should not be under estimated, with these services required to be supplied from a reputable Fire Management specialist.
- Fire Management Plan
- Evacuation Maps clearly defined and on display
- Hard wired smoke detectors in every room
- Fire Extinguishers & Blankets regularly serviced
- Monthly, Six Monthly & Annual Inspections
- Fire Proof box with maintenance records kept on site
- Depending upon number of people additional criteria may apply
Your typical Landlords Insurance policy isn’t appropriate for rent per room properties. Whilst many insurance companies will take your premiums, when it comes to a claim you are almost certainly likely to get knocked back unless you have a policy which is specifically tailored for rent per room facilities. Best to talk to your Insurance Broker to source one of these policies.
Want to know more?
Developer Network has experience in both building Student Accommodation, and also in understanding of the ongoing operational costs and requirements of Student Accommodation (we own several ourselves). Feel free to Contact Us if you would like to know more, or LIKE our Facebook page in order to stay updated on future posts where we will show you how to benefit from this strategy specifically for the Brisbane market.
Why not build some yourself ?
Why not check out our Property Development 101 – Site Analysis course and find sites to convert into Student Accommodation for yourself. Here is what others are saying about our course: