The COVID-19 pandemic has changed the way college students experience campus life. Many colleges and universities welcomed students back into residence halls in the fall of 2021 but the majority of them returned to lower occupancy rates within their dormitories.
Although such challenges and temporary disruptions occur once in a while, they may pave the way for new opportunities. One such opportunity is an investment in student housing. Keep on reading to learn more about the benefits and downsides of investing in student housing and its current state.
Should You Invest in Student Housing?
Those who decide to invest in real estate are doing a good job as they bring the risk to gain profit. Investing in student housing is a great asset class that has proven to be stable even during economic disruptions. This is one of the most stable opportunities for investment if you are willing to gain high returns and protect yourself from financial fluctuations.
People who need to have additional funds for the short-term often turn to the best cash advance apps but if you want to receive profit in the long run, consider investing in student housing. The recent economic recession, unstable situation in the world, and the pandemic have proven this fact.
It might seem scary and risky to invest in student housing for some people. Of course, this decision has pros and cons, and this article discusses them bit later. However, the reality is that investing in student housing is also a beneficial component of real estate.
Advantages of Investing in Student Housing
There are several benefits of investing in student housing real estate. This tactic is becoming more and more popular. According to Research.com, 63% of student housing in the US consists of private rooms rather than shared rooms or apartments. Twenty-two percent of American students live in older on-campus dorms.
- Steady lease renewals. It’s widespread that the organization itself leases the housing at top-rated universities with strong bases for student organizations. These include sororities, fraternities, and sports teams. What does this mean? Student clubs use a certain percentage of their budgets for house organization members.
- Constant demand. Consumers are almost guaranteed that they will gain profit on their investment in student housing, unlike some residential and commercial properties. As long as students enter colleges, student housing will be in great demand and the requirements for undergraduate and graduate degrees are high these days.
- Co-signers to guarantee rent payment. Most college students haven’t established their credit history yet. Hence, student housing properties demand renters to find co-signers on leases. Who can become a co-signer? A guardian, a parent, or a student club advisor may be the one to sign the agreement together with the student. Thus, chances are high that the rent will be paid on time and in full.
- Low maintenance costs. Low expectations are among the top reasons for having student tenants. They only need to get their essentials and basic needs covered. Students usually accept apartments in various conditions. So, you may save on refurbishment and maintenance expenses.
- High enrollment. Although tuition fees are rather high in many countries, the demand for graduate and undergraduate degrees is rising. There is continuously high enrollment and parents keep on sending their kids to colleges and universities. People have a huge need for education these days. Hence, high enrollment is a vital indicator for student housing as the area near a college will be most likely populated with students.
- Recession-proof. You may have already heard the term “recession-proof” from business analysts. Student housing investment is resilient to economic disruptions. The opposite effect on student housing occurs when an economic crisis hits. More students start applying for student housing in contrast to expectations. Why does this happen? They think that a degree will offer them more options to land a desired job and be more competitive in the labor market. Students who have a bachelor’s degree will want to obtain a master’s degree as well if they can afford college.
Downsides of Renting to College Students
There are also some drawbacks of renting to college students and investing in student housing.
- Damage costs. Some students might be irresponsible with the rented property. The owners may need to pay a large sum in damage repairs and home renovations. It may be rather stressful and frustrating as your aim is certainly to make a profit and not to waste your money. Besides, you can’t predict that the next renters won’t be the same if one group of college students moves out.
- Inexperienced renters. Most students rent their very first apartments once they enter college. They have never had experience living in off-campus college housing. Some of them may be inexperienced and irresponsible when it comes to renting and having a good relationship with the landlord. More than that, college students may not be the tidiest tenants.
- A lack of experience with finances. You should keep in mind that students are young and inexperienced with finances as they have no experience of living without their families. You need to have experience with money management to prevent mistakes with personal finances. Landlords will have to fully trust these students unless they can find a co-signer to take responsibility for on-time payments.
- Summer vacancies. College students will most likely go back home after the end of the school year. It may leave you without money for a few months in the summer.
- Breaching of lease agreements. You can’t always trust college students and what they say. You may state that just two or three people may live on your property, but another student may squeeze in so that all of them split rent payments each month. Students may ignore your rules and also hold noisy parties without your permission. It might lead to property damage or affect your relationship with the neighbors.
The Bottom Line
To sum up, you should take a closer look at the pros and cons of investing in student housing. It may bring additional profit especially if you purchase property in the area close to a college or university. If you are willing to do business with students, make sure you understand potential pitfalls and downsides and protect your property from damage or defaults.
