Looking for insight from investors who have experience in class B & C student housing properties. There's a value add play I'm considering for an 18 unit class C property in Baton Rouge, and I like the thought of being able to charge rent on a per room basis and that we could require parents/guardians to co-sign the lease with the student. My concerns with the class are that I suspect tenant turnover is high and that repairs/maintenance would be higher than what they would be renting to non-students.
Any other aspects/advice (positive & negative) that an experienced investor in this space would give to someone who's considering their first student housing deal?
I can't offer input as an investor, but rather as a former student (just graduated 9 months ago). I've lived in a Class A, luxury student housing complex as well as houses.
The way it worked at the luxury student housing complex was they charged per bed and offered services to pair people with random roommates as well. Parking was extra. Amenities were infinity pool, hot tub, sand volleyball court, tanning beds, gym, and vending machines too.
Tenant turnover is going to be high and you're going to have to worry about parties/noise complaints. Maintenance may be a nightmare, so require high security deposit (depending on credit). My landlord charged me the legal max when we moved in (1.5x monthly rent).
What sort of amenities are you planning on offering?
I'm pretty sure there's a few BP podcast episodes that talk about them.
I'd recommend partnering with someone who is already in the space. Yes you won't have 100% of the deal, but the knowledge and insights you'll gain far outweigh the other partner/s split.
Your turn over rate will be near 100%. Since it is 18 units, you shouldn't have a problem with finding a vendor to turn them. Keep in mind that a lot of students have loans, and they are able to pay for the entire term in one payment. Now be ready to deal with a day care like property. Just heads up.
Although your turn over rate will be very high, your occupancy rate will be very low given the demand for student housing. Take the positives with the negatives and prioritize which matters more to you as the investor.
Thanks for the input everyone, I appreciate the feedback.
Good point about the student loans and some students being able to pay their lease in full, didn’t think about that. But there are some challenges with the class, especially the property not being large enough to have on-site management, which I feel like would be beneficial for this type of occupancy.
I noticed that you're from Dallas, and I appreciate the creativity that you applied to potentially sweeten the deal. Without details on the opportunity, I would recommend visiting the property (if you haven't already) to see how much construction is in progress in that area. There has been a ton of student housing development in Baton Rouge recently, with hundreds of more units slated to come online before the fall semester begins this year. You may still have a great deal on your hands, but many of the local investors I have spoken with are hesitant to jump into anything near LSU because of the surge in new constructions. Feel free to reach out if you would like to discuss further with a local. Best of luck!
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