As one group of parents across the nation prepare are anxious about moving their students into college dorm rooms in the fall, another group of parents look at this as an opportunity to invest in real estate. Student housing investment opportunities, in fact, are a growing real estate investment trend. In fact, first-time investors accounted for 34% of student housing transactions in the year 2016. Instead of bemoaning the high cost of campus living in cities all across the nation, opportunistic parents are looking at how they can profit from the current situation.
Student housing can get a bad wrap if you listen to the naysayers, but the reality is there are many great property investments that can provide a substantial return. Although there are certainly problems that can occur, with a well thought out list of renters guidelines many real estate investors can make a significant profit.
College Housing Renters Often Look for Nine Month Leasing Options
The first obvious challenge in investing in real estate properties that are marketed toward college students is the fact that some of these renters do not want a year long lease. With this in mind, many property owners offer several options. First of all, a landlord can make a determination of how much money they need to make in a year to cover the costs and produce a profit. The total can then be divided by nine months, instead of 12. The rent price that you offer is then sufficient even if the apartment sets empty during the three months of summer.
Another popular option is the offer a lock out rate for the summer. For instance, some properties around east coast colleges offer this option because housing is so difficult to find. If, for example, you rent an apartment to students during the school year for $950 a month, you might consider letting your tenants keep their non perishable belongings in the apartment during the two or three summer months at a rate of $400 dollars a month. The students agree to be locked out of the apartment, but are allowed the convenience of not having to move all of their belongings.
A third option is to let your tenants find someone to sublease. In this case, you can still ask for a deposit from the temporary renters.
On Site Management and Frequent Visits Can Help You Protect Your Investment
One way that parents protect their college real estate investments is by making sure that their son or daughter lives on the property. Allowing your son or daughter to select the other roommates can help you control the kind of renters that you have. No one is going to pretend that there will ever be a college house that does not have a party or two, but renting to three nursing students with heavy class loads might actually be a safer bet than letting four random fraternity brothers who you do not know move into your rental.
Another successful scenario if you plan on visiting the campus several times a year might be to purchase a duplex. One side is rented to your daughter and two of her friends, and the other side is available to you when you come to town for the home football games or other events. You save on hotel costs and can get a chance to see how the other side of the property looks.
Consider some of these statistics about the growing opportunity for student accommodation investment opportunities:
- 89% of investors in the U.S. are interested in putting their money into real estate, according to a recent survey by Better Homes and Gardens Real Estate.
- 96% of people who have invested in real estate believe their decision helped them achieve financial success, according to the same Better Homes and Gardens Real Estate survey.
- 30% of the Better Homes and Garden survey respondents indicated they would be more likely to invest in real estate if they had access to a real estate investment professional for guidance.
- The number of students enrolling in higher education in America continues to increase. This will lead to an even greater demand for student housing as well. The National Center for Education Statistics predicts U.S. college enrollment will reach 19.8 million students by the year 2025.