The idea of student housing can be scary to investors. There is a negative connotation when it comes to student housing that it is a dangerous, high-risk investment, and students will trash the place. And while that can be true in some situations, student housing can be a high return yield real estate investment. In this post, we’ll examine some of the reasons why student rentals make good investments. Let’s get started.
Why Student Rentals Make Good Investments
Even with tuition continuing to increase exponentially in recent years, the demand for graduate and undergraduate degrees has never been higher. In cities like Austin, Texas, home to the University of Texas, student enrollment continues to increase and is approaching record-breaking numbers. This leads to high demand. On-campus housing can take years to upgrade, and construction of new residence halls can take even longer. For the smart investor, investing in student housing can be a brilliant strategy, as demand for student housing increases each year.
As alluded to in our first point that enrollment in universities has never been higher, this inevitably leads to high demand. Universities can’t keep up with the demand. In recent years, the only on-campus housing available is to underclassmen; this wasn’t the case even as recently as 20 years ago. But because the actual supply is just not available on campus any longer, we’re seeing real estate developers seize the opportunities to build multifamily and/or mixed used developments in Austin for students off campus.
The term recession proof is often used as a buzz word to grab attention; sometimes it’s use is valid, and other times it is not. Student housing, however, is a time in which the term “recession proof” is viable. We’ve seen, even during a recession, that students will stay in school longer pursuing additional undergrad or graduate degrees. Furthermore, in a recession, there’s a shortage of jobs, and thus many will turn to seeking education in order to “recession proof” their future career. As you can see, even during a recession, the demand for student housing will always be there.
Minimal Chance for 100% Income Loss
Generally when it comes to student housing, you will never loose 100% of your income. For example, say a property is leased to 5 students who each pay $500/month. If one student moves out, you still have 80% of your revenue each month. While it is not ideal in terms of having a vacancy, it is not as bad as investing in a single family property and losing 100% of your income should they decide to move.
Student housing investors in Austin can often find turnkey units in which to invest. What this means is that investors will buy a handful of units in an apartment complex, and rent those out. This leaves the property managers the duties of maintaining and managing the complex.
This may raise eyebrows but investors typically see less delinquency with student housing than with other real estate investments. There could be a number of reasons for this. One possible reason for lower delinquent rates is that the parents are paying the rent, or the parents have signed guarantees that the students will pay their rent on time.
Casey Development, Ltd: Student Housing Developers in Central Texas
While there’s no such thing as a sure thing, we believe investing in student housing developments is as close as an investor can get. For the reasons outlines above, Casey Development has been helping investors find high return yield opportunities through investing in student housing. To learn more about our educational housing investment opportunities in Central Texas, contact us today.