Student Rental Properties: Is It Worthy of Investing?
Student rental properties are a highly profitable investment. They usually come with a high yield and are within walking distance of the university campus. Students tend to have different needs compared to conventional tenants. For example, they don’t require stainless steel appliances. They are also less concerned about a property’s condition.
Stability
Student housing investments provide a stable income that can be used to cover expenses. These properties typically have low operating costs and can be cash flow positive even in years with lower occupancy rates. Investing in student housing is an ideal way to build a long-term passive income source. Another benefit of student housing is that it tends to be less prone to economic shifts than conventional real estate. However, it is important to consider the overall stability of a university town before making a purchase. Another consideration is that students often do not stay during the summer, which can affect rental income. It is also common for students to break their lease early, which can require time and effort to find new tenants. It can be offset by offering incentives for tenants to sign a 12-month contract or using the property for other revenue-generating purposes during the summer months.
High Returns
Student housing provides excellent cash-on-cash returns, especially for novice investors. Investors can typically expect annual returns of over 17% with little to no maintenance or management required. Another advantage of investing in student property is the low vacancy rates. The rental cycle for student housing runs from September to June each year, and it is very rare to experience a vacancy period. It is particularly true for properties near college campuses. As a result, investors can enjoy reliable cash flow year-round regardless of the economic environment. In addition, student properties are often located in high-traffic areas, making them prime locations for capital growth. However, it is important to remember that investment opportunities in student housing are tied to the university’s health. This investment avenue is suitable for some investors like David Adelman. However, this can be one of the best real estate investments if it’s a good fit for you.
High Occupancy Rates
Student accommodation is more popular with tenants than traditional residential properties. Students are looking for new homes for the following year much earlier than usual. Suppose you invest in purpose-built student blocks with en-suite rooms or self-contained ‘pods’ within a short walk from the university. In that case, there is an almost guaranteed demand every year – especially if you invest in areas that have good universities with a reputation for academic success. Student tenant turnover is typically high, as students are usually in and out of uni in three or four years. However, this can be good as it removes the risk of one or two problematic tenants damaging your property. However, it is important to check that the college town you’re investing in has a strong and stable economy. It will ensure that the city can sustain your investment over the long term. Often, student contracts require all tenants to have a guarantor whose name can be used to cover any missed rent payments.
Multiple Income Streams
Investing in student housing can be lucrative for those who want to diversify their real estate portfolio. However, property management can be challenging due to frequent turnovers of tenants. To maximize returns, investors must choose locations with high demand and proximity to campus. Unlike other types of properties, students are typically able to pay their rent quickly. Students also tend to be a lot less picky than other tenants. Rather than worrying about upgrading granite countertops or replacing outdated linoleum, students are more interested in fast internet and a quiet place to study. As a result, investors can expect higher rental returns and a stable cash flow from their investments. However, this type of investment is only for some, especially those new to the real estate investing industry. Investors can still reap the benefits of this unique sector by opting for student housing investments sponsored by reputable companies.
