- October 27, 2017
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Whether you are new to investing or a seasoned pro, there may be one niche market you haven’t yet considered. Investing in student housing is becoming increasingly popular over the past few years, and you’re about to understand why. If you have money to invest, are in close proximity to colleges or universities, and are willing to be patient with first-time renters (and their potential lack of credit), student housing may be a great place for you to make your next investment. As with all investments, being well-informed is imperative to making a good decision. Read on to learn more about what makes this such an important sector.
It’s All About Demand
The highlight of becoming an investor in the student housing sector is that there is an ever-increasing demand for off-campus student housing. In fact, The National Center of Education Statistics predicts a rise of 14% enrollment from 2014 to 2025. With new students filtering in year after year and enrollment numbers rising at this rate, it is not too hard to see why this might be a great investment opportunity.
Before you make the commitment, it’s important to know exactly what you are up against. Check out comparable properties in your area and find out what sort of amenities they offer. Are they able to provide student specials or incentives? How far are students willing to travel from home to campus? These are all important ways to ensure that you are offering your prospective renters valuable return on their dollar.
Know Your Renter
Another key to success in the student housing market is to know your renter and whether or not you can serve his/her needs. Renters in this market don’t meet the same criteria as others and the differences could be enough to dissuade you. Typically these are younger people with little to no renting history or credit. You will likely be dealing with co-signers and the probability of higher turnaround costs due to damage. You may also need to be a bit more forgiving as these new tenants learn the ropes of renting, deciphering their responsibility from yours (minor repairs, upkeep, etc.) This knowledge can be what drives some investors away. However, if you are honest with yourself about your willingness to tolerate these possibilities, the constant need for these properties may make this a great niche for you.
A Safe Investment
Now that we’ve established the need for student housing and who we may be attracting, we can take a moment to see how this type of property can positively impact cash flow. With shorter lease terms and significantly quicker turnaround times between tenants (typically around two weeks), your property is likely to stay full for the vast majority of the year. Additionally, the NOI (or net operating income) in the student housing sector has remained steady (1-5%) over the years. This rarely fluctuates even as the rest of the market changes. While nothing is recession-proof, student housing does not experience the same fluctuations as other real estate markets. While it may not skyrocket when the market peaks like some, it is also far less likely to plummet when the market experiences a recession. This makes it a supremely safe and practical investment.
Opportunities with Schools
With many colleges and universities experiencing challenges finding funding for on-campus housing, off-campus student housing has become increasingly popular. Many schools are not only happy, but eager to refer their prospective students to off-campus housing. Off-campus housing has proven to be safe, clean, and affordable. Being able to offer quality housing to prospective students helps them to attract a wider base of quality students, at no cost to them. Establishing a relationship with the school or schools around you is an easy way to guarantee a continuous stream of tenants and in short, everybody wins.
Interested in Student Housing Investment Opportunities in the Baton Rouge Area?
By now, you should have a clearer idea of the reasons why student housing is a viable and safe investment. It’s time to take the next step and see what’s out there. When making big decisions, it’s important to have the very best working with you, and that’s where SVN/Graham, Langlois & Legendre (SVNGLL) comes in. Our team of dedicated Advisors is here to help you to locate the best investment opportunities in Baton Rouge and the surrounding areas. If you’re looking to maximize your commercial real estate returns or break into the student housing sector, contact SVNGLL today. Check out all of our amazing properties now!