Get The Best ROI From Your Student Accommodation IP
Every year, Australian higher education institutions experience surges of students taking their first step towards their dream careers. With higher numbers of both domestic and international students, comes a higher demand for student-friendly accommodation. For property investors, student accommodation offers huge potential with high rental returns.
Key differences between regular rentals and student accommodation
Student accommodation can come in many different shapes and sizes, from purpose-built buildings with studios and common areas to regular residential houses or apartments with each room leased out separately.
Unlike regular rental properties, student accommodation allows the investor to hold multiple leases within the same property. This commonly results in a higher rental return. Each lease can also be priced differently depending on the room or studio size, length of stay or optional add-ons such as off-street parking or extra storage.
Additional considerations for student accommodation
The student accommodation industry can be competitive based on location and demand. While multiple leases are appealing and can prove to be more profitable, there are further considerations an investor must understand to ensure their student accommodation investment remains successful.
With multiple leases, investors must factor in the higher management needs and fees for the property. Students are unlikely to be studying all year, so having fixed-term leases in place will help decrease the chance of losing income over the semester breaks or holiday seasons.
One of the biggest problems with student accommodation is the increased risk of property damage due to many occupancies and the environment. Therefore, it’s important that the investor has the appropriate landlord and home and contents insurance that covers both private rooms and common areas.
Depreciation benefits of student accommodation
It’s common for students to expect to be able to move into a fully furnished property that they don’t need to buy anything for. The upfront costs of fully furnished accommodation can be expensive, but the investor can reap the benefits of claiming plenty of available depreciation benefits.
Easily removable fixtures and fittings, such as furniture, are a type of plant and equipment asset. Depending on the asset’s value, it can depreciate at a rate based on its effective life or at an accelerated rate in an optional low-value pool. This means that anything from the carpet, beds, desks and even study lamps directly purchased for the property can be depreciated.
These assets, in addition to the capital works allowance depreciation, can significantly boost the investor’s return on their student accommodation investment property.