Is it worth buying single rooms?

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Question

Landlords are facing increasing costs due to higher tax bills and stamp duty. In order to stay profitable, landlords are looking at ways to diversify their property portfolios.

An May 2017 article by property expert Rob Bence in GQ Magazine looked at two new types of property investment that he advises against.

Buying a large house and converting it for student accommodation is a business model that many landlords have found successful, and Bence has identified a new group of students that want more than the standard student accommodation. Student pods are bedrooms within a block that contains communal areas. Often, cleaning and utilities are included in the rent.

Some developers that have built student pod developments offer single rooms for sale to investors, but the owner of the pod does not own the building or have a share in its lease. Many investors have found that student pods have little or no resale value, and promised returns are often exaggerated.

A similar investment is the hotel development, where investors can purchase a single room. In a similar way to student pods, the room owner does not own or have a lease on the rest of the hotel.

These investments are cheap and may make a profit, but the investor has a lack of control over the development where the rooms are located.

Residential landlords wishing to diversify should consider commercial or semi-commercial property. Obviously, these cost more than buying single rooms, but with suitable commercial mortgage finance, commercial property investments can be both affordable and profitable.

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