More problems for those involved in student room investments
News has come to us that a student room investment development in Leicester is causing problems for investors who were offered a guaranteed return on their funds through an insurance scheme. The developer has failed to deliver and the insurance company that was supposed to underwrite the guarantee is having difficulties, meaning the investors are having to bear the brunt of the losses.
It is a disappointment to hear of more student pod investment problems, but it is now clear to our clients that we will no longer offer these student room investments (or student pods / student studio investment types). The major issue for us and some of our clients that we have sold these units to in the past is the lack of control and the artificially created guarantees that some agents have offered in the past. With this development in Leicester, even having an insurance backed guarantee hasn’t solved the issue.
Going in to 2015, we can only warn our investors of handing over their hard earned savings to developments which give huge kickbacks and commissions to the agents involved. As we have mentioned in the past, we have been offered some dubious developments with promises of upto 15% or more in commission. Taking an average price of £60,000 for a typical student room investment, this amounts to figures of £9,000 per unit sold – which is a massive incentive for agents to flood the market with these types of investments and to give the impression that this sector of the market is booming. It is booming mind; for developers – not the end investors. The classic case is Liverpool where a new ‘exclusive’ student development is being offered every few weeks. The reason being that land is cheap and empty buildings are cheap. Liverpool council has experienced massive cuts through the austerity approach by the current Government and the council is looking to raise revenues in any way possible. Granting planning permission across the city in exchange for good sums of cash for empty buildings is an easy way to do this.
Again, we will state that we are not whiter than white. We have offered student room investments in the past and may look to do it again in the future, but only if the right conditions are met. There is only one developer in the market that we feel is covering all aspects of this investment sector and offering a reasonable return to the investor. However, we feel the units being offered are too expensive for what they are. In any case, to remain impartial and not to show bias we won’t be stating who this developer is.
Avoid getting ripped off by student investments
One of the strategies that we have shown is to compare the price that you’re being asked to pay per square footage against the other types of residential type of flats in the immediate area. That is the only viable comparable that you can use when it comes to sales figures – assuming that you are able to sell these student rooms or student pod units to a next time buyer. We have published student pod investment reviews in the past including Bradford, Liverpool and Nottingham.
Have you experienced student pod investment problems?
If you’ve had issues with developers or agents, then we’d be eager to hear from you. This is not a witch hunt or a name and shame opportunity but a chance for all investors to learn the pitfalls and how to avoid further student pod investment problems on future projects that new clients may consider being involved in.
Get in touch with us and we’ll discuss and collate all the relevant experiences with view to publishing a how to guide on how to avoid becoming shark bait for unscrupulous operators in the industry and, in general, what due diligence you should be carrying out before even considering such types of investment in an unregulated market.