Put both tenancies on a 52-week year, net of the summer's VAT, commission, cleaning and utilities, and the break-even premium is about half what scaling the rate suggests.
Compare the two tenancies on net income per bed a year, not on the weekly rate. On an illustrative cluster en-suite bed, a 51-week tenancy at £185 a week earns £8,964 a year against £8,701 for a 44-week tenancy at £195 plus six weeks of summer letting, so the longer let wins by £263 a bed. The shorter tenancy needs £201.16 a week to break even, a premium of 8.7 per cent, not the 15.9 per cent that scaling by 51 over 44 suggests.
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 →
Every operator faces the choice each January when the rate card is set: sell the room for the academic year and keep the summer, or sell it for almost the whole year and give the summer away. Students compare annual bills, so the shorter tenancy usually lets faster and at a higher weekly rate. The question is whether that higher rate, the extra occupancy and the summer income together beat seven more weeks of rent.
| Input | 51-week tenancy | 44-week tenancy |
|---|---|---|
| Weekly rate, £ | 185.00 | 195.00 |
| Weeks let | 51 | 44 |
| Occupancy | 96% | 97% |
| Annual bill to the student, £ | 9,435 | 8,580 |
| Summer weeks available to let | 0 | 6 |
Rents are all-inclusive, so utilities cost the operator £14.00 per occupied bed-week. The 51-week tenant is in residence for 7 extra weeks of summer and consumes them. On the 44-week option, the eight weeks outside the tenancy leave six to let once a week of turnaround at each end is taken out. Those six weeks let to summer schools and groups at £245.00 a bed-week including VAT, at 55 per cent occupancy, with booking commission of 15 per cent on the net-of-VAT income and cleaning and linen at £45.00 per occupied bed-week. The detail of that summer arithmetic is worked in is summer letting worth it for student accommodation.
Net income = rate × weeks × occupancy − extra weeks × utilities × occupancy
= 185.00 × 51 × 96% − 7 × 14.00 × 96% = 9,057.60 − 94.08 = 8,963.52
Excel: =Rate51*51*Occ51-7*Util*Occ51
The utilities line is small but it is the one most comparisons leave out. An all-inclusive rent means the operator pays for the heat, power and water a summer resident uses, and those weeks are rent the operator would otherwise not have.
| Line | £ |
|---|---|
| Occupied bed-weeks: 6 × 55% | 3.3 |
| Gross summer revenue, including VAT | 808.50 |
| Less VAT at one sixth of the gross | 134.75 |
| Net of VAT | 673.75 |
| Less commission at 15% | 101.06 |
| Less cleaning and linen | 148.50 |
| Less utilities | 46.20 |
| Summer contribution | 377.99 |
Net income = rate × weeks × occupancy + summer contribution
= 195.00 × 44 × 97% + 377.99 = 8,322.60 + 377.99 = 8,700.59
The summer is worth less than half of its gross. It is 4.3 per cent of the bed's income on this option, which is why it cannot carry the comparison on its own.
| Measure | 51-week | 44-week |
|---|---|---|
| Tenancy rent collected | 9,057.60 | 8,322.60 |
| Summer contribution | 0.00 | 377.99 |
| Summer utilities for tenants in residence | −94.08 | 0.00 |
| Net income per bed | 8,963.52 | 8,700.59 |
The 51-week tenancy is ahead by £262.93 a bed. On 400 beds that is £105,173 of net operating income a year, worth £1,912,236 at an illustrative 5.50 per cent yield. The decision is worth a valuation line, not a rounding difference.
The break-even rate for the shorter tenancy solves the same equation the other way:
Break-even 44-week rate = (51-week net income − summer contribution) ÷ (44 × occupancy)
= (8,963.52 − 377.99) ÷ (44 × 97%) = 201.16, a premium of 8.7 per cent over £185
Equivalently, the 51-week tenancy has to hold 93.2 per cent occupancy to match the 44-week option as priced. Below that the shorter let wins.
The two inputs that move the answer are how well the 51-week tenancy lets, since students paying £855 more a year are harder to find, and how well the summer sells.
| 51-week occupancy | No summer letting | Summer at 55% | Summer at 80% |
|---|---|---|---|
| 90% | 81 | −297 | −469 |
| 92% | 267 | −111 | −282 |
| 94% | 454 | 76 | −96 |
| 96% | 641 | 263 | 91 |
The summer contributions behind the three columns are £0, £378 and £550 a bed. A scheme near a conference venue or a language-school market can price the 44-week let lower; a scheme with no summer demand should sell 51 weeks unless its long tenancies stop letting. Note how fast the answer flips with occupancy: four points on the 51-week let are worth £373 a bed, almost exactly the whole summer.
The most frequent error is to scale the weekly rate by tenancy length: if 51 weeks sell at £185, then 44 weeks should sell at 185 × 51 ÷ 44 = £214.43 to earn the same. That ignores the summer and the utilities, and it sets the shorter tenancy 6.6 per cent above its true break-even of £201.16. Price the 44-week let there and it stops selling; reject it because the market only pays £195 and you may give up a better option on a scheme with strong summer demand.
The second error is to compare weekly rates or RevPAB on different week bases. A 51-week bed always shows more rent in the year, and a 44-week bed always shows a higher weekly rate. Neither tells you which is worth more; only net income per bed on a 52-week year does, which is why RevPAB must name its base.
Put both tenancies on a 52-week year, net of the summer's VAT, commission, cleaning and utilities and of the utilities the long tenant uses. Here the 51-week let wins by £263 a bed, and the 44-week let breaks even at a premium of 8.7 per cent, not 15.9. Run it room type by room type, since studios and clusters rarely give the same answer. Student Housing Real Estate works the rate card, the summer and RevPAB on both bases for a 520-bed scheme, and the free workbook for this case lets you put your own tenancy lengths into it.
Because students compare annual bills. On the illustrative bed, 44 weeks at £195 cost the student £8,580 against £9,435 for 51 weeks at £185, so the shorter tenancy is £855 cheaper over the year even at a higher weekly rate. Operators can charge more per week and still sell the cheaper annual product.
On the illustrative rates, the 51-week let nets £8,963.52 and the 44-week tenancy collects £8,322.60 of rent, so the summer must contribute £640.92 a bed after VAT, commission, cleaning and utilities. At 55 per cent summer occupancy it contributes £377.99, and even 80 per cent gives only £550, so the rate or the long-let occupancy has to move.
On the illustrative scheme, 93.2 per cent. Below that, the extra seven weeks of rent no longer cover the 44-week option's higher rate, extra occupancy and summer contribution. Each point of occupancy on a £185 51-week bed is worth about £93 a bed a year, so a long tenancy that lets badly loses quickly.
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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