Student housing in towns where colleges and universities are located can make a good investment in certain situations for a variety of reasons.
The first and most obvious reason is the steady stream of students and faculty that need housing. College enrollment has no signs of slowing down, meaning the need for student housing likely won’t be going away either.
From 2000 to 2018 undergraduate enrollment went from 16.6 million students to 13.2 million students, an increase of 26%. The rise is expected to continue, and by 2029 enrollment is estimated to be about 17 million students, according to the National Center for Education Statistics.
In addition to the abundance of students needing housing, there are also several other reasons that student housing can make a good investment.
Low Vacancy Rates - as mentioned above, as long as there are students, you will likely have renters. This can provide a stability that many investors appreciate and might not find in other markets.
Lower Marketing Expenses - because students will be seeking out housing, the marketing expenses can be a lot lower than rentals in other areas. Besides students, college towns also attract other renters because they usually have a variety of restaurants, shops, arts, and community events.
Stable rent prices - rental prices for student housing are likely to stay more stable than other types of housing. They are also less likely to be affected by market changes. There will always be an abundance of renters for student housing, and so rents might not fluctuate as much. This obviously varies for each specific market, and it is always wise to research rental prices and patterns before investing in a certain area.
Steady income stream - if you are looking for a steady income stream, student housing rentals are always in demand and have the potential for a steady income stream. Even if a tenant leaves, there will probably be several other students looking for housing.
Less likely to see depreciation - even if the economy is on a downswing, an investment property for student housing might be less likely to depreciate. In fact, when there are signs of a recession, there is usually an increase in college enrollment, meaning that student housing prices are less likely to be impacted. For example, between 2006 and 2011, two-year colleges saw a 33 percent increase in enrollment.
So, yes, there are many reasons and situations where student housing can make a good investment. But, like any investment, there are also downsides.
Non-traditional lease terms - typically the most common lease term is 12-months, but the school year usually only runs 9-months. Because of this, it can be difficult to find a lease that works for you and the student. Sometimes a landlord will still demand a 12-month lease, but will allow the renters to sublease the apartment for the summer months.
Property upkeep - because student housing is marketed towards a younger population, you might have higher than normal maintenance and upkeep costs. It is a typical stereotype that college students can be less responsible with their property. While this might not always be true, it is important to keep in mind. You can account for this by asking for appropriate security deposits and making realistic estimates of the costs of repairs and maintenance you might incur.
Ultimately, there are pros and cons to investing in student housing, and it is important to look at your own goals to see if it is the right fit for you.