# buying a student accomodation unit



## joe sod (22 Mar 2017)

I am interested in buying a student accomodation unit, they sell at circa 60K and the net rent roll after the management charges are deducted is about 4K, it is a pooled investment which means that every unit owner gets there share of the total rent roll for the building. I am aware of the big disadvantages, you cant live in it yourself and it cannot be sold on the general propery market only to other investors who wish to buy in later. Also the management charges would be much higher than doing it yourself. However the management look after everything so you dont have to worry about bad tennants etc as it is pooled so you get paid no matter . My thinking is that if you have no intention of selling it then you just take the "reduced rent" and forget about it. They also much cheaper than similar non student appartments, they would be priced at 90K +.


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## mtk (22 Mar 2017)

Sounds interesting might explore this myself


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## cremeegg (22 Mar 2017)

For a hands off landlord, these are a good option.

The wear and tear is likely to be more than in an ordinary rental. You will probably have to replace kitchen ware, furniture etc and paint fairly often. You need to cost this in.

Also you are basically at the mercy of the management company. In theory these are appointed by the owners, but there is often a developer who owns a number of units and effectively controls the management. The other side of that is that they have a strong interest in the overall success of the campus, and they are usually good at what they do.

I would ask a few questions. What use is made of the property during the summer period. Are there other student accommodation schemes coming on stream which may make an older one look dated, or far away from the college.


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## joe sod (22 Mar 2017)

my impression is that the refurbishment is done on the whole building every so often, but that if one appartment gets thrashed or has really bad students that break everthing in a particular appartment, the management company will pay for that. The only thing is there seems to be a few of them for sale now so they are not exactly snapped up immediately, you have to be a cash buyer. Therefore I think you need to be prepared to lock up your money for a long time, on the other hand though you are only locking away 60K not 250K etc that you would be by buying a conventional house.


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## Dan Murray (22 Mar 2017)

Hi Joe Sod,

Is it possible for you to send a link to what you have in mind? The quoted net yield of 6.67% seems very attractive - is it genuinely attainable year or year?

Also, does anyone know of a decent research paper of the merits of different types of property ownership for the Irish investor?


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## Vanessa (22 Mar 2017)

Is there an option for short term rental during the Summer months or would you be able to use it for visitors?


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## Palerider (22 Mar 2017)

You lose a lot of control with these types of property investment and that may well suit you. Some of these in Ireland over the years have not worked as planned, they are similar to purchasing the Hotel suites, you are very reliant on the ability of the operator and the exit is unclear which is unappealing to myself. In the Uk the experience seems to be better, Is your investment going to be in Ireland ?


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## cremeegg (22 Mar 2017)

I am not aware of any student accommodation schemes that have collapsed, certainly there have been some hotel schemes which did.

Usually the student accommodation investment gives you title to the individual property, with a pooled rent arrangement available. The hotel schemes just gave you a claim on the letting income.

The best test of any of these things is if they have been operating successfully for a while.


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## Ravima (22 Mar 2017)

Why can't it be sold on the 'general property market'?


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## lukas888 (22 Mar 2017)

I have first hand experience of student accommodation apartments one in Limerick and also one in Letterkenny.At the asking price of 60k
i presume your location is somewhere similar.Most of the schemes were built on foot of section 50 tax breaks similar to section 23.My experience
was not good, if not for the valuable tax break they would have ended as a complete disaster.To be fair both were purchased in 2006 costing 150k.
The Limerick apartment was a pooled scheme and i never once over my ten year ownership received the promised rent.The Letterkenny unit was
a complete disaster and it did collapse.Apart from the main university locations where the demand and numbers are large i would  be very reluctant
to invest.


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## joe sod (22 Mar 2017)

lukas888 said:


> I have first hand experience of student accommodation apartments one in Limerick and also one in Letterkenny.At the asking price of 60k
> i presume your location is somewhere similar.Most of the schemes were built on foot of section 50 tax breaks similar to section 23.My experience
> was not good, if not for the valuable tax break they would have ended as a complete disaster.To be fair both were purchased in 2006 costing 150k.
> The Limerick apartment was a pooled scheme and i never once over my ten year ownership received the promised rent.The Letterkenny unit was
> ...


thanks lukas, so you have first hand experience, so it appears they are much cheaper now than when first sold to investors, Im looking at one in Waterford. When you say the one in letterkenny collapsed what do you mean?did the management company go insolvent?, but you still owned the appartment so the owners could still do something else with the building?
In fairness there is no guarantee of a set rent just giving me the pooled rent paid out for last year. The only thing a bit off putting is that there seems to be a few of them for sale now, if they were so good you would imagine they would be snapped up fast. Maybe people are now wary of these now after experiences like your own and the lack of control by the owners. I think it was built in 2004


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## Palerider (22 Mar 2017)

A quick search reveals a number of two bed apts for sale in Waterford some currently let at €600 a month that would seem a better option, some priced less than €60k, what is it that attracts you to the student accommodation when uncertainty of income and restrictions at exit are evident.


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## lukas888 (22 Mar 2017)

Most of the student accommodation apartments were built from 2002 up to 2007 and were sold to investors at inflated prices.The primary
attraction was the section 50 tax break which in the early years was unlimited but restricted to all rental income.Over successive budgets 
the rules changed and caps etc were introduced and they became less attractive to investors.The main reason more of them are now coming  
on the market is investors had to hold them for ten years or the revenue would initiate a tax clawback.Every town that has a regional college
have section 50 student accommodation and in most cases too many for the number of students looking too rent.Many regional colleges have 
relatively small student numbers and are drawn from the catchment area so the students are able to commute from home.As regards Letterkenny
a purpose built student village of four blocks comprising 68 three and four bed units on the Port Road are now closed and derelict.


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## joe sod (23 Mar 2017)

thanks for your information again lukas, that actually explains alot, I didnt now that about the tax break so that explains why they are only recently coming on the market. Im a bit suspicious why an investor would want to sell at such a loss surely it would be better to hold onto them and continue to collect the rent. Maybe they want to crystallize a capital loss to offset a gain in the future. But after reading some of the posts here Im now a bit wary of them even though I think they are cheap even with all the issues outlined here


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## cremeegg (23 Mar 2017)

Ravima said:


> Why can't it be sold on the 'general property market'?



I dont think there is any restriction on selling these units. The tax break requires that they be used as student accommodation. When that expires after 10 years there is no legal impediment to using them for any residential purpose. Some management companies may try to restrict the use to student accommodation, though I doubt that could be enforced. 

However as a practical matter most of them would be terrible places to live for non students. Having said that I know of one development that was purposely built with the intention of converting to normal apartments once the 10 years expired.


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## lukas888 (23 Mar 2017)

In many of them the planning permission was specifically for student accommodation
use.I don't expect it would be too difficult to apply and attain change of use.


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## joe sod (23 Mar 2017)

Yea but the whole building would have to be converted and that would be up to the management company. It would probably be a speculator moving in to buy the building when they see the time is right, in other words very cheap units. I take your point about the regional nature of these colleges and the ease of travelling from home. Also in Britain very hard to get planning permission for new developments now so good for existing owners, in Ireland we know it's simple to get permission for development especially in the region's. Your example of derelict letterkenny apartments proves this.


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## Ravima (23 Mar 2017)

Yes, my understanding is that the tax break is for 10 years, (these are now as rare as hens teeth!) and that they can be sold on the open market at any stage. JOESOD seems to be saying that it cannot be sold other than to 'investors who wish to buy in later'. This is what I do not understand.


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## Ravima (23 Mar 2017)

In many of them the planning permission was specifically for student accommodation
use.*I don't expect it would be too difficult to apply and attain change of use.
*
Oh yes it would!


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## lukas888 (23 Mar 2017)

Oh no it wouldn't,for starters if the tax break was not fully used up it can be passed on to future buyers even after the ten year period has expired.You are correct they of course can be sold on the open market.As regards
Change of use for general rental i don't see how planning would be any more difficult to obtain than any other development as long as all owners agree.I know that some section 50 schemes were specifically granted by agreement with the participating college and certainly these could be difficult or impossible to get revised planning.


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## lukas888 (23 Mar 2017)

Ravima said:


> Yes, my understanding is that the tax break is for 10 years, (these are now as rare as hens teeth!) and that they can be sold on the open market at any stage. JOESOD seems to be saying that it cannot be sold other than to 'investors who wish to buy in later'. This is what I do not understand.


I presume what Joe Sod means is they can only be sold to investors for student accommodation and not  for open residential lettings.


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## joe sod (23 Mar 2017)

Ravima said:


> Yes, my understanding is that the tax break is for 10 years, (these are now as rare as hens teeth!) and that they can be sold on the open market at any stage. JOESOD seems to be saying that it cannot be sold other than to 'investors who wish to buy in later'. This is what I do not understand.


 
What I mean is they can only be used for student accomodation, you cannot live in it yourself and it cannot be rented to non students, therefore only investors with the money ready to invest can buy them. It would be good if someone that actually owns one now could add to the discussion, I think there are 190 of them in total


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## Bronte (24 Mar 2017)

joe sod said:


> my impression is that the refurbishment is done on the whole building every so often, but that if one appartment gets thrashed or has really bad students that break everthing in a particular appartment, the management company will pay for that. The only thing is there seems to be a few of them for sale now so they are not exactly snapped up immediately, you have to be a cash buyer. Therefore I think you need to be prepared to lock up your money for a long time, on the other hand though you are only locking away 60K not 250K etc that you would be by buying a conventional house.



You get the 'impression' - that's not good enough !

I looked into one of these a few years ago in Limerick I think it was.  And I found out there was a problem because travellers had either bought a load of them or moved in.  Something like that. 

Also I figured out one would be at the mercy of the management company. 

And the fact that so many of them were for sale made me think twice.  I think they were then put on Allsopps.  And auctions (I make no comment on Allsops) are notorious for a way to get rid of problem properties. 

Why will a bank not lend on these properties - is it the general no apartment rule - or something else.  You need to know this.


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## joe sod (24 Mar 2017)

thanks for that input bronte, How did travellers move in surely the management company would have stopped that, especially if students were living there aswell, I thought that would be very serious and could not be ignored. But I am grateful for the insight and information. I have yet to hear a positive experience so I think I will not be investing, I think a normal appartment combined with a management company to do the day to day stuff would be a better option.  Does anyone have recommendations on management companies to manage appartments


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## Bronte (24 Mar 2017)

There's no holy grail Joe sod.  An estate where apartments are sold very quickly and where apartments come up rarely are signs of well managed places, as is the general look of the place.


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## joe sod (25 Mar 2017)

http://www.independent.ie/irish-new...cked-and-rent-increased-by-38pc-35560314.html

an article today about the conditions in a dcu owned student accomodation, they charging 4500euro for a shoddy place built in the 60s, yet people still blaming "greedy landlords" even though this is college owned.


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## huskerdu (25 Mar 2017)

This an interesting discussion, but obvious, simple advice is applicable here. 
The OP needs to know more about this specific apartment before buying, 

What is the student accomodation situation in Waterford. What rents do people pay for equivalent apartments ?
Is there are shortage of accomodation for students. Some towns with ITs have, some dont. 

Do apartments in this block get rented out each year

Waht is the average annual costs, including maintenance, and replacement of furniture. 
Is the block is a good state, will it need repairs, so the MO have a sinking fund etc etc.


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## SirMille (26 Mar 2017)

Dan Murray said:


> Hi Joe Sod,
> 
> Is it possible for you to send a link to what you have in mind? The quoted net yield of 6.67% seems very attractive - is it genuinely attainable year or year?
> 
> Also, does anyone know of a decent research paper of the merits of different types of property ownership for the Irish investor?



I would bite your arm off for 6.7%. But I suspect continual repairs where students are not chased for the cost, would half your yield.


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## cremeegg (26 Mar 2017)

SirMille said:


> I would bite your arm off for 6.7%. But I suspect continual repairs where students are not chased for the cost, would half your yield.



From my experience this is not really fair to students. They are certainly more untidy than other tenants but I have never suffered any real damage beyond a few broken glasses etc.

In any case you should hold a deposit, to cover any repairs that are required.


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## Daddy Ireland (14 Aug 2018)

Bronte said:


> An estate where apartments are sold very quickly and where apartments come up rarely are signs of well managed places, as is the general look of the place.



I have been looking into these for a few weeks.   As it's 18 months since last poster I thought I would resurrect this thread to see if people have any further thoughts.   From my thinking Bronte's post is spot on.  I think as far as student complexes are concerned well managed complexes that are full year on year should about 15 years down the line since most of these were constructed surely merit some consideration or am I mistaken ?


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## noproblem (14 Aug 2018)

There's one block of them I personally know of in Galway, it services students attending the RTC. Had been well run for a few years but quite a few of the apartments were sold which didn't qualify for the tax allowance and everyone and anyone stayed in them. They're not hugely expensive to buy now, but I would have thought the tax allowances have run out at this stage. Ask yourself the question, what happens then?


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## Daddy Ireland (14 Aug 2018)

True but equally there appears to be several very well managed developments 15 years on..


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## AlfaRomeo (16 May 2021)

Daddy Ireland said:


> True but equally there appears to be several very well managed developments 15 years on..


Im thinking of buying one of these in Parchment Square in Cork next to CIT/Munster Technological University. Net rental income is E11,400 P/A after management fee which is E3700. Management company looks after everything so its hands off. This is on campus accommodation 3 minute walk to college and has been there for over 15 years. Seems to be well managed and I think its a good return. They have 100% occupancy except for last year during Covid.


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## simonsterne (29 May 2022)

AlfaRomeo said:


> Im thinking of buying one of these in Parchment Square in Cork next to CIT/Munster Technological University. Net rental income is E11,400 P/A after management fee which is E3700. Management company looks after everything so its hands off. This is on campus accommodation 3 minute walk to college and has been there for over 15 years. Seems to be well managed and I think its a good return. They have 100% occupancy except for last year during Covid.


Hi. I am also contemplating buying student accommodation, but in Limerick. Did you do it and if so, how are you getting on?


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## lff12 (13 Jun 2022)

Ravima said:


> Why can't it be sold on the 'general property market'?


PP is specific for these kinds of developments in terms of use.


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## creditworthy (13 Jun 2022)

Good afternoon .
MayI ask if these student properties are advertised for sale on Daft ofr elsewhere ? 
Thank you .


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## Ravima (13 Jun 2022)

Yes. They come up on DAFT. You can always google the complex with 'for sale' after the name and you might see if there are any currently for sale


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