How to Invest in Student Housing

With an increasing number of students pursuing higher education each year, the demand for student housing continues to rise, making investing in student housing a lucrative opportunity for real estate investors. It not only offers a stable and consistent rental income stream but also presents the opportunity for long-term appreciation of property value.

Moreover, student housing tends to be resilient to economic downturns, as the demand for student accommodation remains relatively stable regardless of market conditions. This can provide investors with a sense of security and predictability in their rental income. Continue reading to learn how to invest in student housing.

Is Investing in Student Housing Worth It?

Investing in student housing can be worth it due to consistent demand, higher rental yields, and shorter vacancy periods. However, it comes with challenges like higher turnover, increased maintenance, and more hands-on management. Success depends largely on location near established universities and your ability to manage student-related issues. If you're comfortable with the extra responsibilities, it can be a profitable investment.

According to data from the National Multifamily Housing Council, the US student housing market is projected to grow by 734,000 beds to 9.2 million by 2031 from  8.5 million in 2020.

How to Invest in Student Housing in 9 Steps

Student housing gives investors an opportunity to generate stable cash flow. If you are interested in this investment opportunity, you can get started with these steps.

1. Determine Your Budget and Financing Options

Investors should consider their financial capacity before searching for student housing properties. Knowing how much you can commit to a down payment and monthly mortgage payments can help you filter your options. Investors can use these early stages to explore financing options, such as traditional mortgages and private lenders.

2. Choose the Right Location

A student housing property near the campus or important amenities like transportation makes the property more desirable. Housing properties near multiple universities have a greater chance of commanding high cash flow and low vacancy rates.

3. Property Selection and Due Diligence

Once you have a location in mind, the property search begins. You can use online platforms, real estate agents and other resources to find student housing properties in the area. Monitoring the property’s structure and safety can help you calculate necessary renovations and gauge the return on investment (ROI).

4. Understand Regulations and Legalities

Investors should become familiar with local housing regulations and landlord-tenant laws. Staying on the right side of the law and knowing your rights can lead to a smoother experience as a property owner.

5. Create an Attractive Living Space

You won’t get tenants just because your property is located near a college. Making the unit attractive for tenants will increase retention and can help you charge higher rent. Maintaining the property and ensuring it has the necessary furnishing, appliances and internet connectivity will help.

6. Market Your Property Effectively

Real estate investors can use several marketing channels to increase their reach. Digital marketing, online listing sites and real estate agents can put your property in front of more people. Investors should highlight the property’s amenities, strengths, proximity to campus and safe environment in their marketing. Some of your tenants may want to give the unit to an underclass student, allowing you to secure additional rent without marketing.

7. Establish Fair Rental Policies

Rental policies lay out how the relationship between the tenant and the landlord should work. It identifies payment schedules, tenant expectations, maintenance procedures and rules for common areas. It is a legal agreement that decreases the likelihood of conflicts or confusion. Clearly communicating the policy with tenants and using a well-defined leasing agreement can result in a more pleasant experience for both parties.

8. Leverage Property Management Services

Some property management companies specialize in student housing. Using property management in the area can lead to higher quality and higher tenant satisfaction. Working with a good property manager gives you time to focus on your investment and pursue new opportunities.

9. Monitor and Adapt to Market Trends

The real estate market constantly changes, and staying on top of trends can help you adjust your strategy. Changing your rental rates, amenities and property management strategies based on demand and expectations can help you maximize profits on student housing properties.

Benefits of Investing in Student Housing

Student housing provides several advantages for investing. These are some of the asset’s advantages.

• Steady Demand and Low Vacancy Rates: Student housing has steady demand as students enroll in the nearby college. Some colleges attract thousands of new students each year, creating a high demand for a low housing supply. Most students will stay on the property throughout the school year, enabling low vacancy rates in the process. High demand allows landlords to set higher prices for their properties and command low vacancy rates.
• Resilience During Economic Fluctuations: Student housing is more resistant to recessions than other investments. Many students continue to go to college during economic recessions, and they need housing. This dynamic helps student housing units continue to provide cash flow when other investments take a step back during recessions.
• Potential for Attractive Returns: Student housing properties can generate long-term gains due to the higher predictability of rent payments. Buying properties located near the campus can increase your returns as many students seek housing that is within walking distance of their classes.

Key Factors to Consider When Investing in Student Housing

Student housing can be a profitable investment, but some assets are better than others. These are some of the factors you should keep in mind to increase the likelihood of finding a profitable student housing investment.

Location

Location plays a critical role in any real estate investment. Buying student housing located near the campus can help you command higher rent prices. Students want to be as close to the campus as possible, preferably within walking distance. Having access to public transportation and other amenities is a nice bonus that can help your property appreciate at a faster rate.

Property Management

A good property management team can address questions, fix issues and facilitate a smooth experience for tenants. Quality property management can encourage students to stick around as tenants. When they graduate, students may ask the landlord to pass the property onto one of their friends, who can become the next tenant.

Amenities and Facilities

Offering amenities like high-speed internet, laundry facilities, security and communal areas will make your property more attractive than other student housing units. While many properties may have the same amenities, having a unique or rare amenity that provides value can lead to higher rent prices.

Market Research

Investors use market research to see what other investors are doing in the area. You can find rental rates, demand and competition in the area. Market research gives you the knowledge to make better investments and stand out from the crowd.

Legal and Regulatory Factors

Investors should monitor the laws for real estate investments in the area. Zoning regulations, rental laws and tenant rights can impact your profits. You should speak with a professional about legal requirements and make sure your investment property is in compliance.

Investing in Student Housing

Student housing properties are a popular draw for investors who want low vacancy rates and high cash flow. The property’s proximity to colleges and public transportation can give you an edge and lead to appreciation in the future. Student housing is one asset to explore, but investors should consider their risk tolerance and financial goals before getting started.

Frequently Asked Questions