Opportunities and Considerations When Investing in Student Housing Apartments

Over the last decade, there has been a shortage of affordable housing for college students and during the next ten years, student housing is predicted to grow by 6 to 10 percent. Investing in student housing developments is nearly recession-proof.

Student housing is in high demand for college and university students who live off-campus but near the university. Many landlords can maximize rental incomes by charging per room. Most college housing leases are 12-month leases, and students who do not stay for summer school sublease their apartments or pay the rent through the summer months.

Advantages for Investors in Student Housing

There are several advantages for investors in student housing. 

1. Many universities have a constant demand for housing due to the steady enrollment of students at colleges and universities across the country. 
2. As noted earlier, renting out individual rooms can maximize the revenue potential of the project. 
3. In economic downturns and higher unemployment, individuals go back to school to improve their education, become more competitive in the marketplace, and need housing.
4. Owners can earn increased ancillary income by offering high-speed internet, communal office space, and food courts to justify higher rents.
5. Many colleges and universities have been around for a century or more, and owners can benefit from their properties' appreciation in value. If ownership decides to sell, these types of properties are often easier to sell than other real estate assets due to their location appeal.

Challenges for Investors

As with any investment, there are challenges to be aware of.  When looking at properties, keep these factors in mind:  

• High tenant turnover is due to student turnover, graduation, and college transfers. 
• Student housing apartments usually have increased maintenance and repair expenses due to a younger tenant base. 

It is important to hire a property management company that has a proven track record of success in leasing, operating, and marketing to the student housing market. 

• Investors should pay close attention to university trends in enrollment if they are increasing or have stabilized or decreased. 
• Location and proximity to the university, as well as whether public buses and transportation are available near the project. The closer the proximity to the campus, the more expensive the apartments become.
• Prior to making your investment, focusing on the location of the campus is very important.  Is the project within walking or biking distance from the university? 

Don’t Forget These 4 Factors for Investing Success 

1. Location is crucial. Factors such as proximity to restaurants, bars, grocery stores, and drug stores should also be considered.
2. When budgeting and deciding on a purchase, a capital needs assessment should be completed to factor in renovation costs and capital repairs that will be needed to make the project appealing and competitive with other student projects in the area.
3. Make sure that a sound marketing plan is in place to advertise your project on online platforms.
4. In addition, investors who price their rentals competitively, offer the most recent technologies and in-demand amenities, along with flexible lease terms will position themselves to succeed.

If you’re new to student housing investing, we suggest reading our Fannie Mae Student Housing FAQs to learn more about terms and benefits. Stay updated on Freddie Mac Student Housing Financing and the many options available.

Ace Your Investment Portfolio Strategy

Ready to reap the potential of student housing investments? LSG Lending is here to help you make sense of it. We offer comprehensive solutions for your student housing investment goals. Contact us today to schedule a consultation and discover how student housing can be a rewarding addition to your investment portfolio.