Student Rental Large Project Failure

7 Replies

The Grove, a REI company who "affiliated" with the University of Louisville was in the news today of to a bad start. However, they offer community living with all utilities paid at 650 per month. Do your comps and reevaluate your student rental pricing! Supply increased, demand will decrease.

https://www.google.com/url?sa=t&source=web&rct=j&e...

Even though supply has increased, some students may want to live off campus since this article talks about safety concerns. Do you think it is a good time to invest in student housing? Should investors rental pricing go down since they offer $650 and utilities?

Not sure, it is still communal living.  I figure they pay 3x$650=$1,950.  3 people could get a 3/3 for a little less.  I would think a 1 bedroom unit would still be better, especially graduate students who prefer off campus housing. @Erik Hitzelberger might know better.

Originally posted by @Clay Smith:

The Grove, a REI company who "affiliated" with the University of Louisville was in the news today of to a bad start. However, they offer community living with all utilities paid at 650 per month. Do your comps and reevaluate your student rental pricing! Supply increased, demand will decrease.

https://www.google.com/url?sa=t&source=web&rct=j&e...

I didn't see any info in the article about unit-pricing.  Where'd that come from?  It sounds like this particular project will actually bump up demand in the area for a while until it's completed.  I've got around 20 units somewhat close to campus and the student and non-student demand has been increasing significantly since I started 3-4 years ago.  It used to take a couple weeks to a month to find a good tenant.  Now I generally do an open-house style showing with a handful of prospects and have a lease signed shortly thereafter.

My guess is that the complexes mentioned in the article as well as the new development across from the (soon to be "ex") site of the UofL grain elevators will pull quite a few tenants out of the neighboring areas.  Most of the pain will probably be felt by the larger companies and/or buildings with one of the many terrible management companies in place.  Students and others will still look for cheaper off-campus options and/or their own space, but they will have more options and won't have to deal with crappy buildings or PMs.  $650 for community style living is still pretty steep in this area, especially if you can't deliver on any of the amenities promised in the literature!  

3+ bedroom houses within a mile or two of campus can easily be found for under $1500/mo.  My nicest 1 bedroom units go for $675 and that's with granite, stainless and brand new everything.  Most 1BR's in the area are around $550-$650 depending on amenities and you won't have to share a kitchen or bathroom with 2 other strangers.  There's still a lot of appeal off campus for all of the young folks living on a tight budget.

Originally posted by @Stephen McCauley:

Even though supply has increased, some students may want to live off campus since this article talks about safety concerns. Do you think it is a good time to invest in student housing? Should investors rental pricing go down since they offer $650 and utilities?

I haven't seen any loss of demand thus far and the new complexes tend to charge higher rents so the "competition" isn't really for the same folks anyway.  I don't expect to drop rents anytime soon, but I may not push them up as aggressively in the years to come if demand starts waning.

The Grove, Province, Bellamy, and whatever the new place at Eastern and Crittendon is called will certainly attract their fair share of students.  However, the price, communal living issues,  safety concerns, etc will drive many others away.  Really nice dorm-living is still dorm-living.  As @Michael Seeker  mentioned, we aren't really competing for the same tenants anyway.  

While campus growth has slowed as the tail end of Gen-Y graduates, there is still an increased demand for college education.  The Grove holds less than 2% of the total campus enrollment and the last time I checked the sum of the campus-affliated housing units was around 24%.  (This may need to be verified again).  In short, the demand isn't going down yet.  

I am definitely looking to increase the number of homes that I have in the area.    

Erik Hitzelberger, Real Estate Agent in KY (#68970)

I got pricing from a lady at work who's daughter worked for the Grove two months.  If you signed up last year it was 620, now 650, next year 700.  They offer 3/3 and 2/2.  You can choose your roommates, but if one backs out or you do not know them they will place a roommate.  Nothing prevents them from placing coed roommates.

I probably undervalued my 3/2 apartments two blocks from campus.  I also saw some extensive campus housing market research a few years ago before they built Cardinal Town which caused me to raise rent on my apartments significantly.  I also used this in setting the price of the new apartments, but it was evidently our of date as rents have risen.  I still prefer to be slightly undervalue to have higher demand and less turnover.

I haven't turned over an apartment in a few months, but didn't notice any less interest this summer.  I think there will always be an appeal for some students to live off campus and more independently.  I also prefer to rent the same units to young professionals: more rental experience, fewer noise complaints, they remember to pay rent and bills, not as reluctant to call you if something isn't right.  Research also indicates that people are waiting longer to purchase a home, so demand form young renting professionals should be higher into the foreseeable future.

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