Last Updated: December 2023
Universities and local community colleges across the country have students that are either relocating to attend school or large student populations that the school cannot entirely house themselves on-campus. Investors have been privy to this supply and demand of apartment rental housing close to campuses, and created a type of residential rental property investment class called “Student Housing” which specifically targets students as the primary tenant demographic. Below we take a deep dive into everything you need to know about student housing rental properties.
What is Student Housing?
Student Housing Definition
A student housing property is a type of rental property that is specifically designed to provide housing for students. These properties are typically owned and operated by universities or other educational institutions and may be either on-campus or off-campus. Student housing properties typically include various amenities and features designed to meet students’ needs, such as laundry facilities, study areas, and common spaces.
Student Housing Explained
Student housing is a type of housing that is specifically designed for students who are attending a college or university. These properties are usually located near the school’s campus and offer amenities geared towards students, such as study lounges, fitness centers, and laundry facilities. Students are always in need of a place to live while they attend school, and by investing in student housing, you can provide them with a comfortable and convenient place to live. One of the best things about student housing is that it is usually leased on a per-bedroom basis. This means you can earn a higher income if you own an interest in a property or properties with multiple bedrooms. Each student who rents a bedroom in your property will be paying their own share of the rent, which can add up to a significant sum of money over time.
4 Types of Student Housing Properties
Student housing is an off-campus housing facility for college students who may have graduated from the dorm room experience and are potentially looking for more privacy and independence, among other things. These apartments or houses are usually owned by landlords and are becoming preferential accommodations for students due to the rising costs of dorm fees. We take a look at each type below.
Shared Houses (HMOs)
Shared houses, also known as Houses in Multiple Occupation (HMOs), are typical residential properties that have been adapted for multiple students to live together. These homes allow students to rent individual rooms while sharing common facilities such as the kitchen, living area, and bathrooms. Given the presence of multiple unrelated individuals under one roof, many jurisdictions mandate special licenses for HMOs. They provide an affordable student housing solution, striking a balance between individual privacy and the experience of communal living. Positioned within residential areas, these houses often exude a more “homely” ambiance compared to purpose-built student residences.
Purpose-Built Student Accommodations (PBSA)
Purpose-Built Student Accommodations (PBSA) are modern structures tailor-made for the student demographic. These accommodations can range from shared flats with individual bedrooms to self-contained studio apartments. They often boast on-site amenities tailored to student life, including gyms, laundry rooms, and communal lounges. Serving as a ready-made solution, these units are typically furnished and situated close to campuses, ensuring student convenience.
Studio Apartments are compact living units that merge the functions of a bedroom, living room, and kitchen, usually complemented by a separate bathroom. These are especially popular among students seeking privacy and independence from shared living environments. Often located in urban areas, these units might come at a premium compared to shared spaces but guarantee a dedicated personal environment. Some studios, especially in student-dense regions, might come furnished or semi-furnished, easing the transition for students.
Private Flats & Apartments
While not exclusively constructed for students, remain a popular choice among this demographic. Students can lease these properties either individually or as a group. These apartments range in size and are versatile in terms of space, location, and amenities. Some landlords, recognizing the student demand, might even furnish these spaces. Being situated in both urban and residential zones, they allow students a deeper integration with the broader community.
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Student Housing Investing
Student Housing Investing Strategies
Investing in privately-owned student housing real estate has emerged as a lucrative niche within the property market. Given the consistent demand for student accommodations in areas with universities and colleges, these properties often promise stable rental incomes and high occupancy rates. Additionally, the cyclical nature of academic sessions allows for periodic adjustments in rental prices, potentially leading to increased returns over time. However, like all real estate ventures, due diligence is essential as factors such as location, quality of the property, and nearby amenities play a crucial role in ensuring profitability. For investors seeking a resilient asset class with growth potential, student housing presents a compelling opportunity.
Financing Student Housing Purchases
Financing student housing real estate requires a thorough understanding of the unique characteristics of this property niche. Traditional lenders, such as banks and credit unions, often provide loans for student accommodations, but terms and rates might vary based on the perceived risks and projected rental incomes. Private investors can also consider partnering with real estate investment trusts (REITs) that specialize in student housing or seek out hard money lenders who might offer faster approvals albeit at higher interest rates. Securing a favorable financing deal often hinges on demonstrating a property’s potential for consistent occupancy and revenue, especially given the seasonal nature of student rentals. Exploring a mix of conventional and non-conventional financing options can empower investors to optimize their purchasing strategy and maximize returns.
Student Housing Property Management
Managing student housing properties requires a unique skill set. From dealing with parental cosigners, frequent turnover, roommate disputes, and the occasional unruly “party tenants”, managing a student housing property is a vastly different endeavor from managing an apartment building. By leveraging property management technology and staying up to date with the latest student housing industry amenities, your property can increase its likelihood of satisfied tenants and abundant profitability.
Top Student Housing Companies
The student housing sector is an essential niche in the rental property market that caters to the unique needs of the student population. The largest student housing companies in this field specialize in developing and managing housing solutions that are not only close to educational institutions but also tailored to the lifestyles and budgets of students. These firms focus on creating safe, convenient, and community-oriented living spaces, often incorporating amenities like study areas, internet access, and communal spaces to foster a conducive learning environment.