Why PBSA has A* potential for property investors

But there are also investors who are thinking carefully about what lies ahead for young people who are heading off to university, and specifically where they are going to live. PBSA is becoming a core consideration for investors, and undoubtedly holds many attractions, yet there are unique challenges that can emerge too.

If investors want to be top of the class when it comes to returns from their portfolio, then they need support from brokers who truly understand PBSA and can help them navigate the complications as they arise.

The need for student housing

The demand for university places remains strong. According to the latest UCAS data, more than 600,000 applications were made in time for January, the highest level in three years. And while the profile of students may be evolving, the need for quality, well-managed accommodation isn’t going anywhere.

In many cities, there simply isn’t enough purpose-built housing to go around, and that’s creating a clear opening for investors and developers.

Gone are the days when students were happy with creaky beds, shared bathrooms and draughty single glazing. Today’s cohort knows they are paying a substantial amount for their studies, and so understandably want more from their student experience.

En-suite bathrooms, high-speed internet, communal areas, on-site gyms and the like are becoming the standard, not the luxury. Parents want peace of mind, while students want comfort and community.

PBSA ticks those boxes in a way that most older HMO simply can’t.

For years, HMOs have been the go-to model. The flexibility, returns and security they provided meant they were a winner for landlords, and did the job for students. But between tightening regulations, tax changes and rising costs, HMOs have not seemed such a sure thing.

The finance challenge

Recognising the need for PBSA is one thing, but securing the funding in order to acquire these premises is quite another. Timing is crucial with all property projects, but none more so than PBSA - miss your deadlines and you risk spending an entire academic year without tenants. It’s simply not viable.

It’s not just timing though. The attitude of lenders can cause further complications. This is a specialist area, and not one that all lenders are comfortable with. As such, we hear frustrations from brokers about lenders insisting on complex, inflexible terms, and loading up deals with caveats and conditions which make it increasingly difficult for the project to proceed.

What brokers and their investor clients need are lenders who will take a different approach, and look for ways to make these PBSA deals easier. It’s why we have improved our PBSA proposition, ensuring that borrowers can access more favourable maximum LTVs and terms than are available for HMO cases.

The proof is in the pudding

A recent case in Leicester demonstrates the issues well. The borrower was an experienced landlord with over 50 residential units. They spotted a great opportunity to take over premises which had already been converted from a pub into a 55-unit PBSA.

The case had great potential — excellent demand from more than 50,000 students in the city, and a borrower who clearly understands property — however the broker was being presented with complications by different lenders. Conditions were being imposed which would have held back the deal, pushing the investor to jump through hoops.

The fact that we understood the time pressures, and could provide a straightforward funding package without those costly caveats was a big factor in the borrower opting for Atom bank.

PBSA is a sector with long-term structural demand, attractive yields, and growing investor interest. But to fully realise that potential, brokers need lenders who genuinely understand the space, and are ready to provide tangible — not just theoretical — support. Those who can’t do that will end up at the bottom of the class.