A property investor has raised concerns regarding the 'net yield' model used in Purpose-Built Student Accommodation (PBSA) investments. The investor, who reserved a studio for £70,700, was presented with a reservation document stating an "8% NET GUARANTEED RENTAL INCOME FOR 2 YEARS."
However, the investor's analysis indicates that the advertised "Net Annual Income" of £5,381 did not account for all deductions. Specifically, a service charge of £2,762 per year and a management fee of £626 per year were not included in this calculation.
When these additional charges are factored in, the calculated net income for the same year reduces to £1,993. This figure represents an approximate yield of 2.82% on the £70,700 purchase price. The investor noted that even the stated £5,381 represented 7.61% of the purchase price, not 8%.
The investor also highlighted that the quoted annual rent of £5,656 is exactly 8% of the purchase price, suggesting a distinction between gross and net income is important. Illustrative calculations based on the £1,993 net income suggest potential capital values of £28,471–£33,217, compared to the £70,700 paid, once the rental guarantee ends.
The investor is coordinating complaints from others who bought on an advertised net yield and suggests checking the appropriate redress scheme, such as The Property Redress Scheme, which is free for complainants and can award up to £25,000.