So, we talk about this a lot – but we need to, because we’re asked about it all the time.
There’s a lot of buzz and fancy marketing attempting to lure you into investing in student pods and in hotels.
For the hands-off investor, there’s plenty to get excited about. We get it. It looks good, it looks promising, it looks like an easy investment opportunity.
On paper it makes complete sense. And if they pan out as promised, then great.
The key thing to remember, of course, is to ask will it go as planned? What are they really promising you here?
The return on student pods and hotels – is it worth it?
You’ve probably seen the ads.
The buy-in is cheap. The returns are impressive. The operator handles everything. It sounds perfect.
But in reality the returns on student pods and hotels is highly unlikely to be as adventurous as the sales team made out.
Look beyond the fancy words and pretty financial illustrations, and don’t be blindsided.
Think about the resale potential of student pods and hotels
Think about your exit strategy. Who on earth is going to buy this after you? Not a first-time buyer, not a student, not a family. The only other people who will be in the market to invest in a student pod or a hotel after you will be…other investors! And any savvy investor is going to want it at a much cheaper price than you bought it for – it’s all part of bagging a great deal!
Look at their previous student pods, hotels and investments
The market for these investments is heavily weighted in favour of the people selling them, not the people who own them.
There’s big incentives for developers to sell student pods and hotel rooms – the commission is likely to be huge. Have a scout at their previous developments; what were they like? What were the levels of return on those?
And if you can’t find much information on the developer…then that’s not a good sign either.
Will it all go to plan with your student pod or hotel?
This is one of the biggest ifs when it comes to these types of developments.
Student pods and hotel room investments are hands-off, but only if things go well.
If things don’t go well, this could prove very hands-on indeed.
With student pods, there’s multiple cases of management companies disappearing after maybe the second or third year, and you go back to the market and look at what is achievable only to find out it’s a very different number to what you were told to expect.
And what if the university suffers a decline in interest? Suddenly that student accommodation isn’t going to be so sought after.
With hotels, we can see the appeal - someone else handles the management, and you collect a return. But you’re placing a lot of faith in the operator. What if the area doesn’t need a hotel? What if a better one opens up the road? Or the project runs massively over budget?
This is why we’d advise treading very carefully.
Even if you do get your rental return (and that can be a big if), you’re not going to see any capital growth.
And if the person selling it is pushing hard for a quick signature, that should tell you everything you need to know.
We’ve talked through plenty of these too-good-to-be-true pitches on The Property Podcast and our YouTube channel – worth a listen before you sign anything.
