The Benefits and Drawbacks of Student Housing Investment

Student housing investments can yield lucrative returns for investors. However, this subset of multifamily real estate also comes with unique risks. Student tenants often damage properties and show a different level of care than long-term renters. It can increase maintenance expenses and overall property wear and tear. Investors need to select college towns that can consistently attract students carefully. It will help ensure that the investment can deliver strong cash flow.

Higher Risk

Student housing investment provides investors with consistent rental income and a high ROI. It also offers the opportunity to buy off-plan property and gain capital growth during the build period. However, it’s important to understand that student tenants typically rent for a shorter duration than other types of tenants, and this can result in higher turnover rates.

Students can be difficult tenants to manage, and their lack of maturity can damage the property, which can be costly for landlords. Additionally, student housing investments typically require much maintenance work to keep the property up-to-date and in good condition. Only a few investors, such as David J Adelman, are a good fit for student housing investments. Therefore, diversifying your portfolio by investing in other real estate is preferable. It’s crucial to invest in a reputable property management business and to get in touch with experts in the area who can provide you with intelligent market insight if you want to reduce the dangers involved with this kind of investment.

Higher Liability Risk

Student housing is an interesting option for real estate investors seeking a new type of investment and diversification. Finding tenants and filling vacancies is typically easier, providing higher yields than other property types. However, it can also come with unique risks and challenges. For example, maintenance costs may significantly reduce a landlord’s profits. Investing in student housing may not be appropriate for people new to investing in real estate or those who do not have experience in managing property.

Additionally, student rental properties are often pre-furnished and leased with parents as co-signers, making moving out more difficult. It can be a problem for investors looking to sell their properties in the future since it can slow down the time it takes to get the property back on the market. Moreover, the high student turnover can mean landlords are liable for more property damage than other rental types.

Higher Rents

Investing in student housing can be lucrative because of high occupancy rates. In addition, these types of investments typically have lower maintenance requirements than traditional real estate. Besides proximity to campus, other factors like furnished units, fitness facilities, and study rooms drive demand for student-specific properties. Additionally, parents often play a role in students’ decision-making process, and amenities that provide convenience and a quality experience, such as inclusive agreements (including bills and Wi-Fi), onsite management teams, and an easy-to-use key card system, appeal to parent buyers.

In addition, many student-specific rental property owners are incorporating green practices into their buildings to make them more energy efficient and environmentally friendly. This feature may not be a selling point for most residential investors, but it could be a factor that appeals to younger generations of renters who want to protect the environment. Also, it can save costs on utility bills for student tenants. Additionally, some student rentals are within walking distance of college campuses, which makes them more appealing for students who don’t have cars.

Higher Maintenance Costs

When students move into a city, they bring their unique needs. They want to be close to campus to attend classes but also wish to access top hospitals and jobs for high-income earners like surgeons. It drives up demand for housing, which results in higher maintenance costs. Investors should be aware of these extra expenses before investing in student housing. They may also face higher liability risks since college-aged tenants often act more recklessly than older renters. Investors can address these issues by researching the best college towns and neighborhoods to find the most lucrative investments. Prices are rising rapidly as institutional capital moves into the student housing sector. However, this surge in prices cannot last forever. Making informed decisions while pursuing this type of investment is crucial because regular residential properties will see higher capital growth in the long term than student property investments.