Hi BP Community!
I'm wondering how a market crash might impact investment properties in a student rental market? I am unsure a crash is coming but wondered how one might impact a buy and hold strategy focused on student rentals, in a college town.
We are invested in a very high rental market and have a newer property (4 years old) and looking to purchase a 13-year-old property as well. Both cashflow, currently, but with a crash how might things change.
Any advice would be greatly appreciated!
Thank you all!
Hi @Daniel T Stockman , what type of crash are you expecting? Personally, I don't see one coming. I do foresee home prices to level out or at worse flatten but that is about it. On the rental side (which is what we care about), I don't foresee a dip in rental rates either. Each market is different but as long as there is an influx of people and jobs being created, rental rates will remain strong. If you are worried about a crash, try and predict how much rental rates will fall (5%, 20%?) and do your analysis on those numbers.
On the student housing side of things, I would be more cautious on that side. My wife works in higher education residence life and she thinks enrollment will continue to go down.
If you are in a "College Town" where the town's survival is based on the College/University, you are more exposed to risk associated with a market crash/recession, initially. The initial reaction will be to drop out of school for those who's parents lost jobs, didn't want to be there in the first place, etc, but what we usually see is people go back to school to earn a different/higher degree during recessions instead of trying to get into the work force. If your school is in a large Metro area, you should be fine even if you have to drop your rent a little and rent to normal residents for a time until the initial shock wears off.
@Brad Hammond Thanks for your take. I'm unsure if there will be one. I also agree that there could be pricing correctly when interest rates increase and home buying slows down.
We are looking at primarily investing only in rentals for students in a very large college rental market. Very large student body. Their college had a 4% increase in enrollment last year, and anticipate another increase this year. So I think it is somewhat protected if there are any changes.
Being new to rental investing I didn't know if there would be any considerations around market volatility (if there is any) that we should be aware of as we get deeper into our College Rental strategy.
@Dave Poeppelmeier Thank you for your response as well! This is helpful and is what we are thinking as well. The rental we have, and the second we are looking to purchase, is/are in towns where the college has roughly 50,000 traditional students and the town has about 90,000 full-time residents. So not big metro areas, but more of a true college town.
With the economic climate and rent forgiveness potentially being extended, we don't want to put ourselves into a bad situation with purchasing the 2nd rental. We are fans of buying and holding, so if there was a correction or crash, we'd really just have to weather the storm, if there was one.