Rent collected on the weeks actually sold, the summer as a separate business, and the cost base per bed, on an illustrative 600-bed scheme.
Student housing NOI is rent collected over the tenancy weeks actually sold, plus summer and other income net of their own costs, less the operating cost per bed and the management fee. On an illustrative 600-bed scheme with a £203 average rate card it comes to £3,850,675, £6,418 a bed and a 67.2 per cent margin. Multiplying beds by the rate card by 52 weeks overstates that NOI by 15.9 per cent.
Worked in full in Student Housing Real Estate by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
A purpose-built block of 600 beds: 360 beds in cluster flats let on 44-week tenancies, and 240 studios let on 51 weeks. Cluster flats empty for the summer and the operator lets some of them to groups and visitors. Utilities are included in the rent, as they are on most direct-let schemes. Every figure is illustrative.
| Input | Value |
|---|---|
| Cluster beds, rate and tenancy | 360 at £175 a week, 44 weeks |
| Studios, rate and tenancy | 240 at £245 a week, 51 weeks |
| Occupancy at the census | 98.0% |
| Bad debt | 1.0% of rent let |
| Summer lets (cluster beds only) | 8 weeks, 40% occupied, £150 a week |
| Direct cost of summer lets | 45% of summer revenue |
| Other income (laundry, fees) | £60 a bed |
| Operating costs | £2,750 a bed |
| Management fee | 4.0% of revenue |
1. Rent potential, on the weeks sold. The unit of student housing is the bed-week, and the two room types sell different numbers of them. Clusters: 360 × £175 × 44 = £2,772,000. Studios: 240 × £245 × 51 = £2,998,800. Potential rent is £5,770,800 over 28,080 contracted bed-weeks, an average of 46.8 weeks a bed.
2. Vacancy and bad debt. At 98.0 per cent occupancy the vacancy loss is £115,416. Bad debt of 1.0 per cent on the rent let takes £56,554. Academic rent collected is £5,598,830.
3. Summer, as a separate business. 360 beds × 8 weeks × 40 per cent × £150 is £172,800 of summer revenue, but cleaning, changeovers, linen and booking commissions take £77,760 of it. Only the net £95,040 belongs in the NOI build. Adding the gross figure and leaving its costs inside a general cleaning line is the most common way a summer is overstated.
4. Other income. 600 × £60 = £36,000. Total revenue is £5,729,870, or £9,550 a bed.
5. Operating costs and the fee.
| Line | Per bed | Total |
|---|---|---|
| Staff | £750 | £450,000 |
| Utilities (all-inclusive) | £900 | £540,000 |
| Repairs and maintenance | £350 | £210,000 |
| Insurance | £200 | £120,000 |
| Marketing and lettings | £150 | £90,000 |
| Cleaning, IT, other | £400 | £240,000 |
| Operating costs | £2,750 | £1,650,000 |
| Management fee at 4.0% of revenue | £229,195 |
NOI = rent collected + net summer + other income − operating costs − management fee
= 5,598,830 + 95,040 + 36,000 − 1,650,000 − 229,195 = £3,850,675
Per bed: 3,850,675 / 600 = £6,418. Margin: 3,850,675 / 5,729,870 = 67.2%.
Excel: =SUMPRODUCT(Beds,Rate,Weeks)*Occ*(1-BadDebt)+SummerNet+Other-OpexPerBed*TotalBeds-Fee*Revenue
Costs come to £3,132 a bed including the fee. Capitalised at an illustrative 5.25 per cent yield, the NOI supports £73,346,197 before purchaser's costs. A lifecycle or refurbishment reserve sits below NOI on most valuations but must be modelled somewhere: student rooms are refitted on a short cycle.
The quick version takes the average rate card, £203.00, and multiplies by 600 beds and 52 weeks: £6,333,600. That is £734,770, or 13.1 per cent, more than the rent collected. Carried through the fee and costs, the shortcut NOI is £4,464,816, 15.9 per cent too high, and at 5.25 per cent the error is worth £11,697,917 of value. Three things cause it: the cluster beds sell 44 weeks, not 52; the census never reaches 100 per cent; and some rent is never paid. The rate card is a price list, not a revenue line, which is why RevPAB is quoted on a stated base of weeks.
The opposite error also occurs: a seller who quotes NOI on 51 weeks for every bed, including clusters that are let for 44, then adds the full summer revenue on top. Seven of the eight summer weeks are counted twice.
| Occupancy | Rates −3% | Rates unchanged | Rates +3% |
|---|---|---|---|
| 94% | £3,476,628 | £3,631,293 | £3,785,957 |
| 96% | £3,583,028 | £3,740,984 | £3,898,940 |
| 98% | £3,689,429 | £3,850,675 | £4,011,922 |
| 99% | £3,742,629 | £3,905,521 | £4,068,413 |
One point of occupancy is worth £54,846 of NOI and one per cent on rates £53,749, so near full occupancy the two levers are almost interchangeable. At 5.25 per cent a single point of census occupancy is £1,044,680 of value, which is why the September letting campaign decides the year: the whole rent roll is sold again every summer.
On an all-inclusive rent the operator is short energy. The rent is fixed for the academic year at booking; the bill is not. A 30 per cent rise in utilities costs £162,000, 4.2 per cent of NOI, and takes the margin from 67.2 to 64.4 per cent, with no way to pass it on until the next rate card. An NOI built on last year's utility cost per bed, with no view of the tariff for the year already let, is a forecast with a hole in it. For the occupancy at which those fixed costs stop being covered, see student housing break-even occupancy.
The book builds the same NOI from a 520-bed rent roll with six room types, and the free workbook for this case computes it, with the summer, its taxes and the cost base per bed, from live formulas.
On a direct-let scheme with utilities included in the rent, margins in the 60s are common in illustrative underwriting. The 600-bed example here runs at 67.2 per cent, and a 30 per cent rise in utility costs takes it to 64.4 per cent. Nomination agreements, which cut marketing and voids but discount the rent and shorten the tenancy, change both sides of the ratio.
Yes, but net of its own direct costs. In the example 8 weeks of summer lets at 40 per cent occupancy bring in £172,800 gross, and changeovers, cleaning and commissions take £77,760, so only £95,040 belongs in NOI. Counting the gross figure, or counting summer weeks already inside a 51-week tenancy, overstates the income.
Yes. A buyer values the income an operator can deliver, so a fee is charged even if the owner runs the building itself. At 4.0 per cent of revenue it is £229,195 here. Omitting it on an owner-operated scheme would add the same amount to NOI, and at a 5.25 per cent yield several million pounds to value.
This article is one calculation from Student Housing Real Estate. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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