Monday, 3 June 2013

A breath of fresh air in the student property market

Most people reading this will know that we are an advocate of the student property market here at Fresh Invest. With good management and an attractive property you can benefit from very high and secure rental yields.

With student demand increasing year upon year and a massive shortage in student accommodation currently available in the UK, it seems like Student Property is a great area for investment and many of our investors have been taking advantage of that fact and profiting

There are many different facets of student property available for investment and we feel that our Student HMO’s are the best opportunity out there right now.

Our latest Student Investment in Liverpool is ideal for those investors looking for large returns but still looking to maintain an easy exit strategy from the investment, with high capital growth.

We now have just 4 houses remaining from 9 in total on this development site and we expect them to sell quickly. The development was only released around 2 weeks ago and since then we have had significant interest in the properties.

Our Liverpool Student Investment was completely designed by us. The developer came to us at the end of last year looking for an idea of how best to develop out a piece of land he currently owned, taking advantage of its location. With our knowledge of the student market up there and previous experience of selling student property in Liverpool and the demand for that type of property from both investors and students, we designed a scheme with the investor in mind, minimising their exposure to risk, whilst maximising returns in capital and rental income.

The site lies within 2 miles of 3 major university campuses and just 2.9 miles from a fourth. With a bus stop just 100 metres from the development, communications with the university are great and students will have no problem getting to the various campuses

The investment provides the investor with the opportunity to invest just £57,000 and generate a net income of £15,310 per year, after mortgage costs, maintenance and management fees!

6 Bedroom Student Town house.
  • Price: £190,000
  • Deposit @ 30%: £57,000
  • Mortgage Amount @70%: £133,000
  • Yearly Rental Income: £25,500
  • Gross Yield: 13.42%
  • Mortgage Cost @5%: £6,650
  • Maintenance: £1,500
  • Management: £2,040
  • Net Return Per Month: £1,276 (£15,310 per annum)
If you would like some further information on any of our student property investments, please either use the appropriate contact form on the website, or send us an email at

Student Property Investment – The Facts

Student Pod investment has most definitely been the “buzz word” in property investment over the last year.
It seems new pod developments are being marketed on a daily basis but are they really all they are cut out to be?

Let’s look at the facts:

History of student property investment
Let’s start with the reason all of these private student halls are being built?

The 2010-2011 academic year saw grants for capital projects, such as new buildings, cut by 58% in cash terms to £223m. In the 2009-2010 academic year, universities received £532m for building works.

Because of this universities were not able to respond to the increased demand from students and had to start to rely on 3rd party builders to satisfy that demand.

Student Pod developers can be easily classed into 2 different categories.

1. Large developers that are cash rich and can build out with their own funds:
This type of developer can afford to purchase a site, gain planning then forward sell to a fund at between 5-8% yields. Generally the developer will secure a FRI lease from the University for 25 years or so. The fund will then agree to purchase on completion.

2. Smaller developers or land owners that want to maximise their profit from land owned:
This type of developer/land owner generally either has an option on or owns the prospective land but does not have the funds to build out. They need to find 3rd party funding outside of the mainstream. These are generally the types of development that are offered to the individual investors.

3rd Party funding is provided by the investors who put down a percentage of the purchase price on exchange which is used by the developer in the construction process.

The absolute key to this type of proposal is to protect the investors deposit, this can be done by staging the tranches in which it is paid to the developer and making sure that a solicitor holds all deposits in a client account. For the developer to receive funds an independent architect would need to sign off each build stage.

How are they priced?
Good question, I will show you how they should be priced first of all.
  1. You decide what you want to build, so self contained pods, houses or flats.
  2. You work out what rental each room should achieve and the number of weeks they will be rented at
  3. You then work out the monthly, then yearly income that can be derived from the site, taking away the maintenance and management fee to give a net figure, divide this by the yield you want to offer and this gives you a sale price.
  4. Take away the agents fee and the site cost and you have net profit to the developer.
If the developer is happy with the level of profit then the investment goes to market, if not, it should be canned.

The Problem:
I won’t beat around the bush, its greedy developers or agents.

Normally when you get to point 4 above and it doesn’t work then it’s the end of the line, unless the developer wants to take less profit or the agent wants to take less commission.

What seems to be happening now is that investment companies use astronomical weekly rentals along with a high number of rental weeks to achieve higher rental returns, and in turn higher sales figures. Sometimes they guarantee this for a year or two but this is just worked into their profit.

I’m seeing a lot of opportunities that are advertised with a guaranteed return for 2 years but with absolutely no comparables to show what these pods will rent for after those 2 years.

An example, if we work to £100pw over 50 weeks -20% for management and maintenance = £4,000 (£40,000) on a 10% yield.

If this doesn’t work, increase the figure to £125pw over 52 weeks – 20% for management and maintenance = £5,200 (£52,000) on a 10% yield.

So you’ve paid £12,000 more for a property already, the developer can afford to guarantee this for 2 years because it will only cost him £3,000 if he rents at the figures of £100pw over 50 weeks.

The downside for the investor is that not only have they paid £12,000 more for the property, but their property will only be achieving a 7.6% yield after the first 2 years!

How would I know if the rentals are realistic?
A good investment company should provide you with full due diligence on the investment opportunity offered. It isn’t enough to offer a guarantee, you should be provided with comparables that show the rental being guaranteed is correct.

All investment companies should have conducted this due diligence as its service to you, if it’s not been done; you need to ask yourself why.

Don’t bury your head in the sand….You need to conduct your own due diligence as well, you can do this by phoning the university accommodation office and ask them about the area you are looking to buy the pod in, also speak to letting agents, its sometimes best to pose as an existing landlord, say you are looking to let your property and ask what you may get for it.

Is Student Accommodation sustainable and what happens if the market declines?
Whilst student numbers remain strong, yes it is. Liverpool universities showed an increase in student numbers last year and good quality student accommodation in favourable areas will always be in demand. What we will start to see is the death of the single landlord that owns a badly furnished house in an average area. I know when I was a student this was our only choice outside of halls. We will see good quality student houses and apartments that are regularly refurbished and well managed flourish but ones that are not will decline.

The management of student accommodation has moved forward massively over the last 10 years, gone are the days that a large percentage of landlords shied away from the student market; with a strong professional management company there should be no more hassle renting to students than there is to professional tenants.

QB Group
82 Great Eastern Street
London EC2A 3JF
T:  +44 (0) 8454 636 856
     +44 (0) 2071 250 542
     +44 (0) 7961 644 344 (24hr cell)
F:  +44 (0) 2088 199 575

Barbados property – promised vs delivered

As construction continues at an admirable rate on our Barbados Property Investments, we believed now would be a good time to update investors with exactly how the developer did, with a picture of what was promised on one of our investments and what is being delivered as we near completion.

Ixora Resort is a development of ten one bed apartments and one, duplex two bed apartment. The development was priced very well by the developer and therefore sold out long before completion.
One of the real benefits for investors in Ixora Resort was the fact that, due to the low initial purchasing prices they make fantastic investments as well as an ideal holiday home. The rental rates on the west coast of Barbados are typically very high, so it does not take many weeks occupancy to make these apartments a very high returning investment. All of the apartments were sold as freehold condominiums with no usage restrictions, which is a rarity in Barbados, where many developments will limit personal usage to 5 weeks per year.

The developer of our resorts in Barbados does not just offer great prices, but they offer security when investing in their off-plan developments. They also offer an online area to each purchaser with details of any correspondence had with the developer, a running construction progress page and the ability to change the internal specifications of apartments from colour choices down to the relocation of non load bearing walls.
We have always felt that it is important, when investing off-plan, to invest with a developer that has long term plans for the area you are investing in. The developer of our Barbados investments has another 3 sites in Barbados, you can be sure they will try to satisfy every client’s best interest so that they are able to continue selling out developments going forward.

With this, we thought we would exclusively tell our clients that they have purchased another site and we will soon begin the marketing process on another great Barbados investment. The site is a beautiful south coast hotel which will be refurbished and turned into self-contained apartments, from studios to 2 beds. Prices will be kept low like their previous two developments in Barbados and the fact that this development is beachfront will only help it achieve sold out status even quicker than the last developments.

Barbados Property, Weston Resort – promised vs delivered

As our property investment in Barbados, Weston Resort approaches completion, we thought we would show our valued clients some details of another success story for investors on a Fresh Invest Overseas Property Investment.

We started selling the Weston Resort development back in 2010, after a long period of due diligence where we looked at every development up and down the coastline of Barbados we settled with Weston Resort for a number of reasons:
  • Weston Resort comfortably out priced any similar development in the locality,
  • The developer for Weston Resort is a well established company in the UK with long term plans in Barbados,
  • Through a good presale phase and innovative payment plans we knew the developer had the funds to build,
  • All funds from buyers were ring-fenced and only used to build on this development,
  • The apartments were all sold as freehold condominiums, giving the purchaser maximum control post completion,
  • Common areas are owned by the owners’ co-operative meaning maintenance fees are kept low… In some cases, 90% lower than surrounding developments!
  • There were a number of offers from professional rental operators, who on completion were happy to take on the rental management of the apartments.
  • Through our due diligence we found that the apartments should yield in excess of 10% AFTER management costs.
As soon as we launched Weston Resort it got a great response and many units were sold at very early stages to savvy investors who could see the value on offer. Investors took advantage of flexible payment plans and were thrilled to see such security throughout the build program, with individual stages being signed off prior to funds being released from their solicitor to the developer.

One thing which we came to notice very quickly was the professionalism of the developer we were partnered with. All purchasers on the development were given updates through the build schedule of the progress along with anything else which was having an effect on the progress.

All purchasers were also given access to their own online secure area where construction pictures were posted regularly and owners were also given the chance to design the interior of their apartment using a clever program put together by the developer, where it would simulate the choices made for the purchaser online.

Now the development is in its completion phase, we do have a number of units for resale from purchasers whose situation have changed since their investment. The resales are all priced very well. With prices from $248,950 these are still far better value than the local competition.
Contact us today to discuss any of the resale apartments we currently have available and we will be happy to talk you through the development and arrange any viewings or purchases you may like to make.

QB Group
82 Great Eastern Street
London EC2A 3JF
T:  +44 (0) 8454 636 856
     +44 (0) 2071 250 542
     +44 (0) 7961 644 344 (24hr cell)
F:  +44 (0) 2088 199 575