Investing in Student Housing: Is it Worth it?

Do you live in a college town? Or perhaps you have fond memories of your college years and have kept in touch with people who live near you old campus. Whatever it is that’s made you consider investing in student housing has led you to ask the fundamental question: is it worth it?

We’ve written this article to help you weigh the advantages and disadvantages to investing in student housing. The market in this area of real estate has recently become quite hot, making it an even more tantalizing prospect. So, what do you have to know about the student housing market before diving in?

Student Housing Facts

These facts will give you a sense of what you need to know about the market:

  • Enrollment is on the rise. At colleges around the country, undergraduate enrollment is up 30% as of 2015 since 2000. By 2026, enrollment will reach a new record of 19.3 million students (enrollment was 17 million in 2015).
  • Dorms are at least 51 years old on average. There’s nothing necessarily wrong with old buildings, but they can be harder to manage and perform upkeep on. This is especially true for Universities that have a lot of properties to keep up with. Student housing isn’t always the priority, meaning that students prefer to seek alternatives.
  • Occupancy rates for new off-campus housing are 90% and above. There is a clear demand for student housing not provided by colleges and universities.
  • It’s appreciating. Student housing is only worth more and more, an average of $66,386 per bed in 2016, up 10% since 2014.
  • Student housing caps are still above the caps for conventional multifamily housing.

Joining the student housing market can be as easy as purchasing a duplex to rent out to students, or you can go all the way with dorm-style apartment buildings tailored for students to live in.

Considerations About Student Housing

Student housing may involve a hefty investment in order to secure real estate close to the college or university. Of course, you can also choose an option that’s further away from the school that will be attractive for grad students or individuals who take on a local job after graduation. The closer to the university, the more expensive the properties typically are. Of course, you can often make up for the additional cost in rent.

In addition, college students are usually young and are likely to be first-time renters. College students have a reputation for partying and may cause trouble with neighbors, and also put a lot of wear and tear on the building and installations. As first time renters, they may call more often about easy repairs that older renters might not bother to report and fix on their own. Even if parents have gotten involved as co-signers, this could be an additional headache. Some parents will attempt to micromanage from afar while others will be completely hands-off.

Despite these downsides, student housing can be remarkably profitable. If you’re interested in getting into it, you’ll have to make solid plans for dealing with the difficult areas of the business. Then, start property hunting and with any luck you’ll see excellent returns on your investment.

Love being a landlord but not the repairs and tenant hunting? Contact A Creative Property Management at 714.881.5655 for help managing your rental property.