Home to 2.86 million higher education students, the UK boasts some of the world’s most prestigious universities, including 24 Russell Group institutions. But it’s no secret that UK tuition fees and other living costs associated with university can be quite an investment, particularly for those coming from abroad.
Helping to offset these university education costs, many savvy investors are turning to UK property investment – a tried and tested model to earn while your child studies. Property investment is a smart strategy that holds promise for both your financial goals and your child’s academic potential.
Whether your child will live in the property during their studies, or if you’re buying an investment property to help balance the costs of higher education fees, it’s a common strategy employed by many parents financially planning for their child’s future.
This guide will explore the possibilities of investing in build-to-rent residential property to help fund your child’s education, giving an overview of different investment options, and exploring key UK property hotspots offering the strongest return on investment.
Investing in residential vs. student property for your child’s education
Although purpose-built student accommodation (PBSA) is a brilliant investment with strong return potential, it is rare for investors to purchase for their children to live in the property themselves. PBSA is typically sold off-plan 2-3 years before completion, making it difficult to determine which university city your child will go on to study in at the time of purchase. Student accommodation is also operated on a group rent collection basis, meaning rent is collected each month by the operator, then dividends are paid out to investors quarterly. This would mean your child couldn’t live in the property rent-free.
Residential property, on the other hand, is still often sold off-plan but allows investors more freedom and flexibility with their property investment. If privately managed, you can choose for your child to live in the property rent-free and benefit from capital growth over time, also allowing the option to keep the property post-graduation to either support your child starting their career in the city, or giving you the flexibility to rent out your property to a tenant.
Not to mention the home comforts of a residential property, offering privacy, independence and space. With residential property, you have the choice of apartment types ranging from a studio to a three-bed. Two-beds can be a great investment option for students either seeking more space, a home office, or looking to share with friends during their studies.
If you’re buying solely for investment and your child won’t be living in the property, Select Property recommends a two-bed investment as they appeal to the widest demographic – couples, friends sharing, single occupants seeking more space. Read our blog on how many bedrooms is best for an investment property.
Benefits of investing in UK property for your child
There are many benefits to property investment, including capital appreciation, strong rental yields and peace of mind in owning a tangible asset. But what makes property investment a great strategy to support your child’s education or future?
- If you are buying an investment property that your child won’t be living in, you can rent the property out and use the rental income to support your child’s university fees
- If your child is going to live in the property, you can relax knowing they are in a safe, secure residential property with luxury home comforts
- As the owner, you can control whether you charge them rent and how much, avoiding annual rental increases imposed by landlords
- All Select Property residential developments are shaped around community and security
- Residential property in key university cities such as Manchester, Sheffield and Birmingham offer strong capital growth, projecting an average of 20% growth over five years
- You can visit your child at university (especially if the property is a two or three-bed) – overnight visits are not an option within student accommodation
- You have the flexibility to keep the property beyond their studies, giving them a city-centre home to access the best job opportunities or let the property to earn rental income.
- Residential properties in prime city centres are in high demand, meaning you can easily sell the property when you are ready to exit
- If you are purchasing the property for your child, they will leave university with a tangible asset that has appreciated in capital growth
- For overseas investors, UK property is a smart diversification strategy with the added benefit of supporting your child’s future.
- Mortgage your property to allow you more cash flow and flexibility
- If you’re an overseas property investor, you can benefit from the exchange rate and earn in a stable currency (GBP).
UK property investment returns vs. university tuition and accommodation fees
Typically, undergraduate courses at UK universities last for three years, with tuition costs varying significantly depending on the course and whether you are a domestic or international student.
The average cost is estimated to be around £22,200 per year, while private sector student accommodation costs (excluding London property) are estimated to be an average of £912 per month for a studio (term time is September-June). Based on these costs the average total cost of university sits at around £93,960.
*For an accurate idea of student fees, please conduct your own research based on course type and nationality.
So how does this stack up with the potential returns of property investment? For Select Property’s latest residential development, Velocity Tower in Sheffield city centre, you could earn £107,000 on a one-bed apartment over five years.
Five-year growth projections – Velocity Tower, Sheffield, UK
| Based on an average one-bedroom: | Priced at £174,410 |
| 5-year rent forecast (7-7.8% gross) | £64,532 |
| 5-year capital growth forecast (4% annual growth) | £42,930 |
| Total 5-year return | £107,462 (62%) |
Studios are also a great option, coming in at a lower price point and attracting students. Helping to balance the costs of your child’s education fees, property investment is an excellent strategy to financially plan for the future.
The best UK cities to invest in property for the highest returns
UK city centres are attracting property investors from all over the world. Offering high demand, stable growth and strong rental yields, key university cities outside of London such as Sheffield, Manchester and Birmingham remain top investment choices.
Investment highlights of each city:
Sheffield:
- UK’s fourth largest city
- Home to 67,000 students across two universities – Russell Group, The University of Sheffield, and Sheffield Hallam
- 42% graduate retention rate (high rental demand from young professionals)
- Lower capital entry point to other cities
- Average rental yield of 7.2% in S1 postcode
- 20% capital growth forecast over the next five years
Discover 8 reasons to invest in Sheffield property in our blog.
Manchester:
- Established investment city
- Home to five universities including Russell Group, The University of Manchester
- 52% graduate retention rate
- Average rental yields of over 6%
- 20% capital growth forecast over the next five years
Birmingham:
- Established investment city with five universities including Russell Group, The University of Birmingham
- Second largest city in the UK
- 41% graduate retention rate
- Thriving economy boosted by job growth, business opportunities, and foreign investment
- Average rental yields of over 6%
- 20% capital growth forecast over the next five years
Investing with Select Property
With a range of investment opportunities across the UK’s highest yielding cities, our properties are chosen with safety, convenience and community in mind, meeting the dual needs of generating income and providing a safe living space for students.
Offering an end-to-end investment experience, Select Property can manage every aspect of your investment in-house, from mortgage recommendations to tenancy management.
Contact us to find out more about how UK property investment can support your goals and help fund your child’s higher education.