Advice on purchasing apartment in a managed student block

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Scouser

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A 3 bed apartment has come on the market locally that's on a managed student block. Current asking is 110K with projected rent at 11K. There is a management fee of 3.5K. Welcome advice from current landlords of this kind, would it be a good investment?

I have my own limited company so might look at the option of the company buying it as an investment, advice here would be great too.
 
I am unsure if student apartment blocks are run differently from 'ordinary' apartment blocks but see no reason why they should be.

In my opinion, a management fee of 3.5k p.a. is excessive. You should check how the finances of the management company are - you can do this on line for a small fee (€5 - €10) on several sites.
 
If you buy it through a company the company would be liable for CGT on any profits made in a future sale, and the money would still be taxable coming out of the company. Generally not a good idea.

The gross return is 6.8% before expenses, before tax. Thats not a good deal.

Also what protection have you against the management company jacking up the prices in future.

These developments are generally for the benefit of the promoters. They bought the land, they got the planning, they negotiated the tax relief, they built the properties, they get the cream.
 
I would second cremeegg's advice above. Your return is only 7.5% assuming they come good with the occupancy. You'd do better to but your own place and get an agency to look after it. btw is this the UK you are talking about or are these deals arriving on Irish shores now as well ?
 
Scouser said:
Thanks all, re location, the apartment block is in Cork.
Click to expand...

I have been thinking further about this opportunity. While the return is less than the best that can be had from property at the moment, perhaps it has other attractions. Especially if you want to be a hands off landlord.

If the management company has a good presence on site, if they select the tenants and are good at it etc, that means less work for you. Also in this situation where they specialise in running student accommodation they bring a lot more to the table that the traditional letting agent.

As I said above the operators get the cream in these developments, however this means that they have a vested interest in keeping them running smoothly. If they have been doing that successfully for a number of years they will probably keep doing so.

These properties are just for rental. They are unlikely to ever be bought as someones home. This probably means that the price will reflect rental values only. This may make the capital value less risky.

If your comparison is to money in the bank perhaps something like this is really not a bad option. There are better property investments, but those may require more work and more risk.
 
The gross yield looks ok to me but I would ask hard questions about what is (and is not) included in the management fee.

I would imagine the repair bills for student accommodation would be above average.

Also, is the projected rent based on 12-months full occupation? Is that realistic for student accommodation?
 
I live close to UCD and take a stroll there. There are a number of student blocks of accommodation on the campus. Every summer the skips arrive and they are filled with mattresses, duvets, pillows, fridges, kettles,toasters etc. Then the summer foreign students arrive from overseas and the same thing happens again in the autumn to a lesser degree. There is an onsite management presence and it looks well managed. I can understand the high management fees.
 
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