While universities are bursting with record numbers of students, most of them are living in accommodation that was built when Tony Blair was Prime Minister.
Since 2012, nearly 470,000 additional full-time students have joined UK universities.
Yet during that same period, only 260,000 new student beds were delivered.
And a massive 65% of existing purpose-built student accommodation (PBSA) was constructed before 2012.
This creates what property experts call a “two-tier market” – and it’s exactly where smart investors are making money
Students today expect modern facilities, high-speed internet, en-suite bathrooms, and social spaces that look Instagram-ready. When they’re choosing between a tired 1990s conversion and a gleaming new development, there’s no contest.
But you don’t need to build from scratch to capture those premium rents.
Strategic refurbishment of aging student accommodation can increase rental income by 20-40% while dramatically improving occupancy rates.
The Two-Tier Student Accommodation Market
Walking around any university town today, you’ll quickly spot the divide.
There are the shiny new developments with floor-to-ceiling windows and rooftop terraces, charging premium rents and maintaining waiting lists.
Then there are the older blocks, functional but increasingly dated, struggling to compete.
The Scale of the Opportunity
In major university cities like Nottingham, a staggering 78% of student accommodation was built before 2012. Oxford sits at 83%, while Manchester reaches 68%.
These aren’t small numbers – we’re talking about thousands of student beds that no longer meet modern expectations.
Students aren’t shy about expressing their preferences.
Online reviews, social media posts, and word-of-mouth recommendations heavily favour properties with modern amenities. A basic room in an upgraded block can command £30-50 more per week than an identical room in an unrenovated building next door.
What Modern Students Actually Want
Gone are the days when a bed and a shared bathroom down the corridor sufficed!
Students expect en-suite facilities, decent kitchen spaces, proper storage, and communal areas where they can socialise and study.
Student satisfaction scores increasingly factor accommodation quality into overall rankings.
When prospective students and their parents visit campuses, accommodation quality has a big influence on their final decision about where to study.
What is PBSA Refurbishment Finance?
Think of PBSA refurbishment finance as a specialist lending product designed specifically for upgrading student accommodation.
How It Differs from Standard Loans
The key difference lies in how lenders assess the opportunity.
Instead of just looking at current rental income, they focus heavily on post-refurbishment rental potential. This makes sense when you consider that a well-executed refurbishment can transform a dated property into a premium student residence.
Refurbishment finance works by providing funds based on the improved value of your property after renovation work completes.
Lenders will assess the current property value and the projected gross development value (GDV) following refurbishment. The loan amount usually sits somewhere between 65-75% of the post-refurbishment value, though this varies depending on the project’s scope and your experience.
Most lenders structure these loans as short-term facilities, running anywhere from 12 to 36 months.
This gives you time to complete the refurbishment work and either refinance onto a longer-term HMO/Commercial mortgage or sell the improved property.
Light vs Heavy Refurbishment Opportunities
The finance for property refurbishment is split into two main categories, each requiring different approaches and funding levels.
Light refurbishment focuses on cosmetic improvements that dramatically enhance appeal without major structural work.
We’re talking about new kitchens and bathrooms, fresh decoration, upgraded common areas, and technology improvements like high-speed Wi-Fi throughout the building.
Heavy refurbishment involves more substantial changes – converting shared bathroom facilities into en-suites, reconfiguring layouts to create more appealing living spaces, structural changes or adding new communal facilities.
These ‘heavy’ projects require more significant investment but the rental uplifts can be correspondingly higher.
PBSA Construction Finance
If you are looking to build, rather than refurb, then look to PBSA Development Finance.
This offers specialist funding for Purpose-Built Student Accommodation developments from £1m to £100m+.
PBSA development finance is short-term funding designed to cover your project costs from land acquisition through to completion, typically lasting 18-36 months.
learn moreLet’s Talk!
How PBSA Refurbishment Finance Works
Lenders who support this market know they’re not just financing bricks and mortar – they’re backing your ability to transform an underperforming asset into something students actually want to live in.
As normal, the process starts with a detailed assessment of your existing property and your refurbishment plans.
Lenders want to see evidence that you understand the local student market.
- What are competing properties offering?
- What rental rates are achievable post-refurbishment?
- How will your upgraded property stand out in the local market?
Refurb funding gets released in stages, aligned with your schedule of works.
You might receive an initial drawdown to purchase the property (if you’re buying to refurbish), followed by further releases as work progresses.
This staged approach protects the lender while ensuring you have funds available when needed.
Unless the property is particularly dilapidated, most refurbishment work needs to happen during summer months when they are vacant.
This means having your finance arranged well in advance and contractors lined up to start work immediately after students leave in June.
Loan terms can run to 12-18 months and most lenders will let you roll up the interest, if the LTGDV is right.
Alternative Approaches
While direct ownership and refurbishment works for many investors, several alternative structures can unlock other opportunities.
Joint ventures with existing student accommodation providers offer one attractive route.
You might partner with an experienced operator who handles day-to-day management while you provide the property and refurbishment capital. These arrangements can access better rental rates through the operator’s existing relationships and marketing channels.
Forward-sold refurbishment deals provide another option.
Here, you secure a buyer for the improved property before starting work. The forward funding approach reduces market risk but often means accepting a lower overall profit in exchange for greater certainty.
Some investors prefer using bridging finance for quick property acquisition followed by immediate refurbishment funding.
This approach works well when you spot an undervalued property that needs moving on quickly, perhaps at auction or from a motivated seller.
How Specialist Brokers Add Value
Student accommodation refurbishment involves enough moving parts that professional guidance often pays for itself many times over.
Specialist brokers bring several advantages that general mortgage advisers simply can’t match.
Lender Access and Market Knowledge
While your mortgage broker might know one or two lenders who “sometimes” do student accommodation, specialists work with lenders who understand this market inside out.
This often translates to better rates, higher loan-to-value ratios, and more flexible terms.
Regulatory Guidance
The regulatory landscape around student accommodation continues evolving.
HMO licensing, fire safety requirements, and energy efficiency standards all impact refurbishment projects. Brokers can guide you in the right direction.
Your Next Steps
The opportunity in aging student accommodation won’t last forever.
As more investors recognise the potential, competition for suitable refurbishment projects will increase. Universities are also taking more direct action, either improving their own stock or partnering with developers for new builds.
But right now, the fundamentals remain compelling.
Student numbers continue growing, demand for quality accommodation outstrips supply, and there’s still plenty of pre-2012 stock waiting for improvement.
Research university towns in your area or regions where you’d like to invest. Look for areas with high proportions of aging student accommodation and strong rental markets.
Most importantly, speak with a broker who specialises in PBSA refurbishment finance.
They can help you understand what’s achievable in your target market, which lenders offer the most suitable products, and how to structure deals for optimal returns.
To speak with a specialist broker, please call us on 020 3951 2828.
FAQ
Most lenders offer 65-75% of the post-refurbishment property value, though this depends on your experience and the project scope. Loan amounts typically start from £150,000 with no upper limit for suitable projects.
Light refurbishment involves cosmetic improvements like new kitchens, bathrooms, and decoration. Heavy refurbishment includes structural changes like creating en-suites or reconfiguring layouts.
Read more: Light and Heavy Refurbishment Loans Compared
Light refurbishment should not require planning permission, while heavy refurbishment involving structural changes typically does. The planning process can take several months, so factor this into your project timeline and financing arrangements.
Related: Change of Use & Bridging Finance: A Guide to Property Conversion
Well-executed refurbishments can increase rental income by 20-40%, with premium upgrades achieving even higher returns. The exact increase depends on your location, competition, and the quality of improvements made.
Look for established university cities with high proportions of pre-2012 accommodation. Cities like Nottingham (78% pre-2012), Oxford (83%), and Manchester (68%) offer significant opportunities due to the age of existing stock.
PBSA finance is tailored for student accommodation, with lenders understanding academic year cycles, student preferences, and rental potential. Standard development finance may not always appreciate these market nuances or offer suitable terms.
