Is Student Housing A Good Investment?

Investing in student housing is an excellent asset class to add to your portfolio. It has proven to be resilient during economic fluctuations, such as the current pandemic has provided.

Plus, it’s also known as one of the most stable investment opportunities available today due to its growing business potential and high returns.

Consider the many upcoming graduates ready to leave their parental homes and start their college or university life. They will need a place to live, especially if they don’t want to pay the high costs of on-campus dorm living. 

The population of college students continues to grow each year. This means that there will continue to be a high demand for student housing throughout the country, which is why it’s important to invest now before prices skyrocket or opportunities run out.

Below, we will discuss the benefits of investing in student housing and some of the opportunities available in today’s market.

The Benefits of Investing in Student Housing

There are many reasons why investing in student housing is a good idea. Here are just a few examples of why many people are considering taking this financial opportunity:

Strong Rental Demand

There is a consistent growth in the number of students enrolled in universities, creating a high demand for student housing. This presents an opportunity for investors as there is potential for stable and consistent returns.

Student Housing investment can provide stability and cash flow throughout all seasons due to the year-round nature of academic calendars. In contrast, traditional investments such as vacation homes or retail spaces are more susceptible to seasonal fluctuations.

Students Are Reliable Tenants

In most cases, students are reliable tenants since they are enrolled in a school and need to be there for a specific amount of time. Also, parents are generally footing the housing bills, so you aren’t relying on young people to pay the rent.

Both students and their parents want to keep their living situation as stress-free as possible to focus on their studies. This means that you can usually count on them to pay on time and take care of the property. 

Consistent Rent

The turnover can be pretty erratic when you invest in an apartment building. However, when you invest in student housing, you’ll know precisely the terms of the stay because it will be based on their enrollment. 

Many student housing landlords appreciate the value of having a consistent flow of rental income based on a specific timeframe. Plus, when the current people graduate and move on, there are plenty of new students searching for housing.  

The current students often have friends looking for student housing and will recommend renting the place to other people when they are about to move out. 

Lower Expectations, Save Big! 

Student housing is generally less expensive than traditional apartment complexes or homes, making it an attractive option for investors who want to maximize their profits without sacrificing quality. 

In addition, student housing is usually less risky and more stable than other investments since there is a constant supply of new people attending schools each year.

Tax Benefits

Investing in student housing offers several valuable tax benefits, including depreciation and tax-free income from some forms of student housing.

Cheaper Properties Available

Due to less demand from traditional renters, houses designed specifically for student housing tend to be cheaper than other types of rental properties. This can make it easier for you as an investor or landlord to obtain lower rates on mortgages and bank loans.

Also, suppose your property isn’t located near any universities or colleges. In that case, this could also reduce the supply of interested buyers/renters, thus increasing the value of your investment over time.

Just ensure that the commute is doable and students would still be interested in living somewhere outside the usual student housing areas. If your property is close to a city center or shopping district, it could be more appealing to those who want to live further away from school. 

Adding Value to the Community

Investing in student housing can be a great way to create social change. By providing safe and affordable housing for students, you are helping to make higher education more accessible for everyone. This is a significant venture that can have a ripple effect on society.

The Downsides of Investing in Student Housing 

There are several potential downsides to investing in student housing, including the demand for student housing is not always stable. Enrollment at colleges and universities can fluctuate from year to year, affecting occupancy rates and rental income.

Next, it can be challenging to recoup your investment in student housing. The cost of building or renovating a property designed for students is often high, and it may take longer than expected to generate a return on your investment.

There is always the risk that you could lose money if a tenant skips out on their rent or damages the property. Student tenants can be more challenging to manage than traditional renters, and they may not be as reliable when paying their bills if parents do not support them. 

Finding a reliable property manager for student housing can also be challenging. Since students are often transient, turnover rates tend to be higher when you own or manage properties explicitly designed for them.

Depending on the size of the student housing, there may be more upkeep and costs than typically found when investing in a smaller house. You may need to hire additional staff to keep the property well maintained year after year. 

Last but not least, some student housing can become party central for groups of students looking for places to hang out. If this happens to your rental property, there can be huge expenses when it comes to the repairs needed.  

This leads to the next thing— always make sure your property is appropriately insured and covers students occupying your rental home or apartment building. Some insurance companies have specific policies that are designed to handle student housing.  

Final Words

Investing in student housing can be a profitable venture if you’re looking for an alternative way to make money. However, it’s essential to do your research and consider the risks before signing any contracts with developers or management companies. 

Get in touch with us today to learn about investing in student housing and the various opportunities available in this growing market.