{"id":122674,"date":"2020-02-26T05:00:24","date_gmt":"2020-02-26T12:00:24","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=122674"},"modified":"2021-03-16T14:58:54","modified_gmt":"2021-03-16T20:58:54","slug":"8-reasons-student-rentals-make-great-investment-properties","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/8-reasons-student-rentals-make-great-investment-properties","title":{"rendered":"8 Reasons Student Rentals Make Good Investment Properties"},"content":{"rendered":"<p>Let&#8217;s talk about investing in student rentals (aka student housing)\u2014an area of real estate that&#8217;s near and dear to my heart, because it is the area that I got my start in.<\/p>\n<p>I know what you&#8217;re thinking: &#8220;Student housing is scary.&#8221; That&#8217;s what I thought when I first started, too. And it can be!<\/p>\n<p>There is that connotation when it comes to student housing that it&#8217;s just a dangerous and high-risk game, where you have students trashing the place. If you&#8217;re not careful, that can be true.<\/p>\n<p>But the reality is, student housing is a bonafide area in real estate. There are companies that have built their business models around student housing.<\/p>\n<p>And some of the unique aspects of student housing is really what I want to get into here. So, I&#8217;m going to talk about some of the benefits of student housing and how some of the returns you can get are even better comparatively to other areas in residential and <a href=\"\/renewsblog\/2013\/05\/15\/commercial-real-estate-investing\/\" target=\"_blank\" rel=\"noopener noreferrer\">commercial real estate<\/a>.<\/p>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/HdQhT8sHtSs\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h2>Pros of Renting to Students<\/h2>\n<h3>1. High enrollment<\/h3>\n<p>Despite tuition increasing in the United States, Canada, and other areas in Europe, there still seems to be a great demand for undergraduate and graduate degrees. Student enrollment continues to increase and some of it in certain states and countries is actually record-breaking. I believe in the U.K., in 2018 and 2019, the number of undergraduate applications surpassed any previous year.<\/p>\n<p>So, we&#8217;re still seeing a huge demand. And as you know with real estate, that&#8217;s a huge component of how you&#8217;re going to perceive your longer-term outlooks. With other types of real estate, job growth and demographics are the most important indicators.<\/p>\n<p>But in this case, when it comes to student housing, that&#8217;s really your proxy. Applications and continued application can indicate growth in a certain area or around a certain university.<\/p>\n<p><strong><em>Related: <\/em><\/strong><em><a href=\"https:\/\/www.biggerpockets.com\/blog\/student-housing-rentals\" target=\"_blank\" rel=\"noopener noreferrer\">4 Vital Tips for Tapping Into the Lucrative Niche of Student Housing<\/a><\/em><\/p>\n<h3>2. High demand<\/h3>\n<p>Universities just can&#8217;t keep up with the demand. If you&#8217;ve gone to university in the recent past, you&#8217;ve come to realize that the actual housing on campus often is only offered to first-year students. That wasn&#8217;t always the case for a lot of universities. That was <em>the<\/em> accommodation for students.<\/p>\n<p>But because the actual supply is just not available on campus any longer, we&#8217;re seeing developers come in and build purpose-built student apartments for students outside of campus. And we&#8217;re seeing that all across the country, as well as in other markets across the pond.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-74176\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2015\/07\/student-housing.jpg\" alt=\"student-housing\" width=\"702\" height=\"335\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2015\/07\/student-housing.jpg 702w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2015\/07\/student-housing-300x143.jpg 300w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><\/p>\n<h3>3. Recession-proof<\/h3>\n<p>You hear the term &#8220;recession-proof&#8221; thrown around all the time. And sometimes it&#8217;s valid; sometimes it&#8217;s not. Student housing actually is a genuine area, in my opinion, that is as close to recession-proof as possible.<\/p>\n<p>In many areas, an economic downturn can actually have the opposite effect on student housing compared to what happens in other areas of real estate. During a recession, more people do apply. When job prospects don&#8217;t look good for people who are about to enter the labor market, they see staying in school and perhaps getting an undergraduate degree (or an undergraduate student getting a master&#8217;s degree) as their best available option.<\/p>\n<p>So, you still see that demand there\u2014even during a recession.<\/p>\n<p>When I first started investing, it was &#8217;07\/&#8217;08 and that was all student housing. We really saw no dip in vacancy in the student markets that we were in, despite dips in vacancy in the market abroad.<\/p>\n<h3>4. No chance for 100% loss of income<\/h3>\n<p>One nice thing here is that you usually don&#8217;t have 100 percent loss of income. What I mean by that is, when you have for example a single family house rented out to one family, if that family leaves, you&#8217;re now down at zero income\u20140 percent to 100 percent, that&#8217;s a big swing.<\/p>\n<p>With student housing, for instance, the first property I bought had five students. They were each paying something like $500 or $550. And when you had one student leave, you still had 80 percent of your income coming in. In terms of your actual vacancy, sure, it&#8217;s not ideal. But it&#8217;s not as bad as losing your full income.<\/p>\n<p>There were times where I had student housing that had eight students, lost two or three of them at one time, and then filled that spot a few months later. But you still don&#8217;t have the big wipeout down to 0 percent, given the demand in student housing.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-117244 size-main-slider\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2016\/10\/college-graduates-main-702x336.jpg\" alt=\"Celebration Education Graduation Student Success Learning Concept\" width=\"702\" height=\"336\" title=\"\"><\/p>\n<h3>5. Turnkey<\/h3>\n<p>We&#8217;re seeing actually a lot of <a href=\"\/renewsblog\/2015\/12\/15\/turnkey-real-estate\/\" target=\"_blank\" rel=\"noopener noreferrer\">turnkey student investments<\/a>. And what that is, is we&#8217;ll see developers buy large apartments or condominiums and either sell the condominiums or <a href=\"\/renewsblog\/2013\/01\/04\/how-to-rent-your-house\/\" target=\"_blank\" rel=\"noopener noreferrer\">rent out<\/a> the actual apartment units.<\/p>\n<p>In that case, you can purchase smaller units within a larger complex and have a relatively turnkey investment where they manage it. And that&#8217;s part of their business\u2014you really don&#8217;t have to think about anything.<\/p>\n<p><strong><em>Related: <\/em><\/strong><em><a href=\"https:\/\/www.biggerpockets.com\/blog\/student-rentals-pros-cons\" target=\"_blank\" rel=\"noopener noreferrer\">Student Housing Is My Best-Performing Investment (But Yes, There Are Some Drawbacks)<\/a><\/em><\/p>\n<h3>6. Concrete structures<\/h3>\n<p>The great thing with these places is they&#8217;re often built concrete-based. So, the actual amount of damage a student can do in there is relatively limited. I heard one investor say they&#8217;re built like prisons\u2014and the funny part is they are.<\/p>\n<h3>7. Less delinquency<\/h3>\n<p>If I told you there is a guaranteed investment, you&#8217;d probably think I&#8217;m crazy. But student rentals are actually one of the closest things. You do get a guaranteed income. I can&#8217;t remember how many times I&#8217;d have parents guarantee\u2014actually signed guarantees\u2014for their students. It&#8217;s not uncommon in student areas.<\/p>\n<p>And the reality is, I have actually in my student rentals seen less delinquency than any other area in real estate. I think the reality is, when somebody is going to school, they&#8217;re going to school for a purpose.<\/p>\n<p>Plus, a lot of times it&#8217;s the parents who are paying. Not all the time\u2014but I find when the students are the ones actually paying, they&#8217;re even more prone to make sure that the rent payment goes in on the first of the month.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-80546\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2016\/09\/college-invest.jpg\" alt=\"college-invest\" width=\"702\" height=\"336\" title=\"\"><\/p>\n<h3>8. Maintain market rents<\/h3>\n<p>For any of the states that have rent control\u2014by that I mean a specific time where you can&#8217;t actually raise rent until you have a new tenant\u2014that can be such a pain. If you have long-term tenants that are paying such a low amount, you can never &#8220;mark to market&#8221; as they would say.<\/p>\n<p>With student rental investing, what&#8217;s great is that you will have a new crop of students every two, three, four years\u2014you&#8217;re always going to be able to mark to market. So if you&#8217;re in one of those states or one of those provinces where you have rent control, you&#8217;re always going to be able to get new students in, because they finish their degree and then they go live wherever they&#8217;re going to work or they go back to their hometown or home city.<\/p>\n<h2>The Bottom Line<\/h2>\n<p>So what I&#8217;ll say in summary, when it comes to student rentals, they are a great investment. And sometimes you can get some of the best returns with this area.<\/p>\n<p>Now, you should be careful. There is, like any investment, risk associated with it. But in our business, it&#8217;s all about trying to find where that risk is and being able to contain it.<\/p>\n<p>With student rentals, I feel a lot of people look at it and turn away immediately. There&#8217;s just this bad connotation that comes with students and housing\u2014and it really doesn&#8217;t have to be that way. Even if you really don&#8217;t want to manage yourself, there&#8217;s always third party management.<\/p>\n<p>That&#8217;s another beauty about student rentals: If you have an area, a university\/college town that&#8217;s booming with students and development, what else is there? There&#8217;s usually property management companies that are full service and know how to manage students and do the administration. This is especially great since it can be a little bit more laborious when it comes to students, because there&#8217;s a bit more turnover.<\/p>\n<p><a href=\"https:\/\/www.youtube.com\/channel\/UCVWDbXqQ8cupuVpotWNt2eg\" target=\"_blank\" rel=\"noopener\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-114268\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/08\/6.jpg\" alt=\"ad-youtube-channel\" width=\"706\" height=\"125\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/08\/6.jpg 706w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/08\/6-300x53.jpg 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/08\/6-702x125.jpg 702w\" sizes=\"auto, (max-width: 706px) 100vw, 706px\" \/><\/a><\/p>\n<p><em>Questions? Comments?<\/em><\/p>\n<p><strong>Let&#8217;s talk below.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Are student rentals (aka student housing) a high-risk real estate investment? Many people assume you&#8217;d just have teens and 20-somethings trashing the place. And if you&#8217;re not careful, that can be true. But the reality is, there are so many upsides to investing in this niche. <\/p>\n","protected":false},"author":201209,"featured_media":114005,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5183],"tags":[],"class_list":["post-122674","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-landlording"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/122674","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/201209"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=122674"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/122674\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/114005"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=122674"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=122674"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=122674"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}