Buying a student rental

no1cake

I was left some money by my late mother and am looking at investing in property , is the student Accommodation market a good route? I want it purely as a long term investment, protecting the capital and giving an income. I have seen purpose built student accommodation with a return after ‘expenses ie ground rent etc’ of 8%Pa guaranteed over 5 years, is this a good move or too good to be true?

Stubod

The simple answer is "no it is not a good move, (IMHO), but to get a meaningful reply you need to post more information about your circumstances, eg age, pensions, work status, retirement plans, home ownership, mortgage / debts etc. eg you may be better off paying off any debts, and or putting the money into a pension, or investing in S&S...

eddddy

Many of those schemes are just scams.

TBH, if they are saying they guarantee 8% pa for 5 years - I'd very strongly suspect that they're scammers, trying to tempt you with offers that seem 'too good to be true'.

But if you're still unsure, ask for a copy of the legal pack - that's the contracts, leases, leaseback agreements etc.  Then read every word of the pack, and make sure you understand every word. Or even better, ask a solicitor to read it.

I read a legal pack like that a few years ago - it was over 100 pages long. It was shockingly bad. Nobody who actually understood the contracts would have signed them.

macman

That doesn't appear to be 'buying a student rental' at all. Rather just investing in a company that builds and rent to students. Two very different things. 

Comms69

Guarantees 8% pa- they wouldn’t need to advertise and would be flooded with real investments....

eddddy

macman said:

That doesn't appear to be 'buying a student rental' at all. Rather just investing in a company that builds and rent to students. Two very different things. 

Typically, it does involve 'buying a [leasehold] property'...  it might be set up like this:

• You buy a leasehold 'student room' from company A
• You lease it back to company B
• You pay (large) management fees / admin to company C
• The room is rented out to students by company D - and they pass the rent on to you
• Company D pay guarantee rent for the first 5 years (equiv to 8% of what you paid for the leasehold student room)

Which all seems reasonable at first sight - until you consider the fine detail. And then you find it's a great big pile of.....!

no1cake

Ok thanks for the responses, so I’m 62, own my own home have no debts, this is only a segment of my inheritance.  I’m looking at this purely to give me extra income and to protect the capital for my children.

The property I’m looking at is a purpose built property built specifically for the university students in that city and it’s the developer selling off individual flats in the building, there is a registered company dealing with the rental side of things. I’ve been recommended Lockings solicitors to deal with the conveyancing, Anyone have experience of dealing with them

eddddy

no1cake said:

Ok thanks for the responses, so I’m 62, own my own home have no debts, this is only a segment of my inheritance.  I’m looking at this purely to give me extra income and to protect the capital for my children.

The property I’m looking at is a purpose built property built specifically for the university students in that city and it’s the developer selling off individual flats in the building, there is a registered company dealing with the rental side of things. I’ve been recommended Lockings solicitors to deal with the conveyancing, Anyone have experience of dealing with them

Who recommended those solicitors? Hopefully not the people trying to sell you this scheme.

This is an unregulated scheme. That means that nobody is checking that what they tell you is truthful, and nobody is keeping an eye on their activities.  So unregulated schemes are only suitable for experienced, sophisticated investors.

Your losses could end up being greater than your initial investment.

FWIW, here's an example of an unregulated investment where 65% of the investment went straight to the salesman as commission.  https://citywire.co.uk/new-model-adviser/news/adviser-was-paid-65-commission-on-unregulated-scheme/a776792

It is much safer to only invest in regulated schemes through regulated firms.