Every year, millions of students graduate high school and pursue higher education. Many of these students require housing, especially if they are studying away from home. In fact, college students make up over 8% of the entire rental population. With college enrollments expected to rise, investing in student housing can be a lucrative opportunity.
Why is student housing a good investment?
Student housing presents a unique investment opportunity due to its existing and well-defined target market. Some of the advantages of investing in student housing include:
- Minimal marketing effort: College towns are vibrant communities that attract students naturally, making it easier to find tenants without extensive marketing.
- Consistent demand: Each year, new graduates and faculty members require housing, ensuring a steady stream of potential renters.
- High cash flow: Student housing is always in demand, allowing landlords to charge competitive rent rates. Additionally, properties near campuses tend to have high occupancy rates.
- Low vacancies: Student rental properties are often quickly rented, and tenants tend to stay for extended periods, even during the summer.
While the benefits of student property investments are compelling, it's important to consider the potential drawbacks:
- Property damage: College students, still learning to be responsible, may cause damage to the property. Landlords might have to allocate resources for repairs.
- Tenant turnover: Tenants dropping out or graduating before their lease ends can lead to frequent turnover, requiring additional time and money for advertising and preparation.
- Active involvement: Managing student housing requires continuous monitoring, maintenance, and dealing with tenant issues, making it a more hands-on investment.
How to get started in student property investments
If the drawbacks mentioned above are not deal-breakers for you, here are the steps to get started in student property investments:
Location, location, location
The first step in investing in student housing is selecting the right location. Consider factors such as average food prices, housing costs, job opportunities, and social amenities. Look for properties near the college or along public transportation routes. Consulting a local realtor can provide valuable insights.
Find a property to invest in
Different types of properties, such as apartments, duplexes, or single-family homes, can be suitable for student housing. Evaluate properties based on the rental potential in the neighborhood, typical occupancy rates, and the cash flow they can generate.
Choose how to finance the purchase
Financing options for student property investments include traditional bank loans, programs like Freddie Mac or Fannie Mae, and commercial mortgage-backed securities. Before committing to a mortgage, consider closing costs and potential renovation expenses.
Decide property management terms
Decide between managing the property yourself or hiring a property management company. Self-management offers more control but requires more involvement, while hiring a management company offers a more passive income generation method.
Market your student housing
Once you have invested in student housing, effectively market your rental property. Utilize flyers, brochures, and advertisements in college newspapers or online publications. If you choose to hire a property management company, they will handle the marketing for you. Satisfied tenants may also recommend your property to others.
Student housing is a good investment
Like any investment, student property investments have both advantages and disadvantages. It is essential to assess your personal tolerance for risk before making a decision. Consider partnering with Ark7, a trusted investment platform, to simplify the process of investing in student rental properties.