Real-Estate Investment: Student Accommodation
Article: types of student accommodation and the reasons for investment.
Students at universities and colleges are usually living away from home for the first time – and they need somewhere to live. Many institutions don’t provide accommodation, or an insufficient amount or quality, meaning there’s an opportunity for private-sector investors.
Students are often on tight budgets, so they typically house-hunt in groups, looking to split the costs between 3-8 people. Although each individual may have a smaller budget than, say, a professional couple or family, groups of house-sharers have a buying power that should not be ignored.
looking up to very colourful facade of student housing facilities on campus
Groups of sharers, whether young professionals or students, are a good market to target for:
- Large, urban properties – particularly those without a garden, which are unattractive to families
- Properties in need of updating – facilities should be in working order, but sharers usually care more about their budget than décor
Advantages of investing in student housing properties
- Fixed tenancy of usually one year (rather than six months)
- High demand in certain areas
- Usually accept lower standards of housing
- Typically groups – may be able to charge higher rent overall
- Can often advertise through the university or other targeted channels
- Demand for large or multi-room properties
Disadvantages of investing in student properties
- High turnover – expect a tenancy to last one or two years
- May cause more damage than other groups of tenants
- May have to deal with disagreements between tenants
What to look for when investing in student accommodation
Selecting a student property is much the same as choosing any other real-estate investment. Additional questions to ask include:
- How many educational institutions are there nearby? What percentage of their students lives in campus housing?
- How many bedrooms are there? You can expect one tenant per bedroom (although may get more for larger rooms), which will affect your returns.
- Can I convert any other rooms in the building into a bedroom?
- How many bathrooms are there? Could I add a second toilet? Six adults getting ready every morning need more than one sink.
- Can I furnish the building economically? Students rarely bring furniture.
- Are the kitchen/living room/dining room large enough for sharers? As these will be communal areas, they are likely to get a fair amount of use.
- Will I mind if any of this gets damaged? Like a communal fridge at work, house shares are often messy simply because it’s everyone’s responsibility to clean (and sometimes that means that no one does it).
- Does the building need special maintenance? The garden? Students are often living away from home for the first time and therefore don’t have much experience managing a house. If fruit trees need pruning or gutters clearing, expect to book it in – and pay for it – yourself.
- Can I – or my property manager – undertake regular inspections?
Special rules for student properties
As students are typically young and inexperienced, there may be additional rules regarding their rental terms. These may come from regulators, often in the form of standards for house-shares or multi-family properties, or from the institutions where the students are enrolled, often in the form of codes that landlords must subscribe to in order to be allowed to advertise to students.
Issues to consider include:
- What are the local rules regarding multi-family properties? This is particularly important if you are planning a conversion from a single-family property to a multi-family property.
- How easy is it to advertise at the university? Are their any local codes or standards to consider?
Students are likely to be friends but not related by close ties, which means that each student may count as a separate family for the purposes of determining whether a property is a single-family or a multi-family home.