Delivering Double Digit Yields in Student Property

Earlier this month, a new purpose built student property in Aberdeen was completed and 100% occupied from day 1. Rental income had initially been projected at £130 per week, but the rents secured actually ranged from £150 to as much as £200 per week - up to 54% higher.

"We are always conservative in our rental projections, so as to provide something that is both viable and robust," explains James Harrington, Business Development Manager at Emerging Property, the agents for the property. "Such a leap in rental income ensures our investors benefit from a highly secure, high yielding investment, with extremely healthy capital growth prospects and a fully flexible exit."

Indeed, investors into this 30-bed development receive 10% NET income guaranteed for 10 years. Not only does this ensure double digit yields, but too it enhances exit flexibility. An investor is able to provide extremely attractive conditions at resale at all times – even with capital growth of up to 40%.

Along with their partner developer, Emerging Property has now worked on six UK student properties over the past 12 months. The first of these, in Sunderland, was pre-tenanted during just one open day.  Another development in the same city was 100% occupied in spring, typically a difficult time for attracting students but the property is well located and well researched so achieved a rental income at an average of 6% higher than projections.  Some students who rented this much sought after purpose built property continued to rent their existing rooms in order to secure a room in the building for the following academic year.

The key to such high returns begins with the careful selection of a city and a specific site for development. Just weeks after the Aberdeen property was complete, the city's main university had to house 100 first year students in a hotel due to the chronic housing shortage. The city is now also number one in Savills's University Town and City Rankings (Savills UK Student Housing Spotlight 2014).

"We identified Aberdeen as a city in dire need of student development after conducting independent research," James Harrington recalls. "After securing a site, completing the development and fully renting it out, Savills and other developers picked up on it. Being ahead of the curve enabled us to provide our investors with such attractive returns and security."

He further went on to explain that they are extremely careful not to get involved in the bidding wars on plots that some of their competitors get caught up in, which limit investor returns and often impact on quality.

Emerging Property's student development partner is the UK's only NHBC registered student developer and have won an NHBC award for build quality. The NHBC registration means the developer must build to a higher standard than UK building regulation.  At key stages of the build independent RICS quality checks are undertaken and must be passed.  This results in providing each unit owner with a 10 year structural warranty upon completion.  So investors can be sure to receive excellent build quality and protects both investors and the developer against high repair bills for 10 years.

All developments have been completed on schedule – something that is not true of a number of other student developments – and quality is clear throughout. This has been illustrated in the overwhelming demand for the rooms and the high rents secured. Immediate, or almost immediate, income is available on each of the investments, while other agents are offering investments that will generate zero income for up to two years (whilst waiting for them to be built).

Emerging Property currently has two UK student property investments available to investors, in Sunderland and Leicester.  Both provide investors with immediate income and 10% NET guaranteed for 10 years.