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Assured returns?


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I have been trawling Rightmove/zoopla finding properties to analyse. Main aim being to assess them for rental yield. Then I came across some student accommodation with some mind blowing features:

 

3 years assured returns at 8.5% net

No maintenance or ground fees for 3 years 

No letting fees.

This all sounds too good to be true? I'm dying to know what I'm missing? 

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My guess would be over the odds charges for those expenses that you mention as being included for the first three years when you hit the 4th year. In my area I believe that, even pre covid, there was/is also considerable over supply of this type of accommodation so filling it from year 4 might be a problem too. 

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Hi Max

Most likely the assured rent and no expenses have been factored into the purchase price, or they're being used as sweeteners to try and shift the properties. 

Some things to consider besides the headline figures:

  • As they're student accommodations, you're limited in terms of exit - i.e. selling to another investor. What's the end goal/exit plan?
  • What's the local market / competition like? i.e. for the same level of rent and purchase price, what else is available? Are there other purpose built student accommodation available / being built causing over-supply?
  • Who's assuring the rent? The agent, developer or insurance policy? If it's the agent/developer, what happens to the assurance if they go bust?

Continue to do your due diligence and see what else you can find.

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