Student Housing : The Next Big Trend In Indian Real Estate Market
College communities can be a good place to invest money if you’re looking for a steady, predictable return. This is particularly true as the number of students enrolling in college continues to climb. Around 2000 and 2017, undergraduate enrollment increased by 27%, according to the National Center for Education Statistics, with another 3% increase expected by 2028.
Cash flow is supreme as a landlord and real estate owner. The aim is to achieve consistent cash flow independent of the state of the economy. Campus accommodation has those benefits, which is why more developers are purchasing properties in college towns for student housing.
During the global economic crisis, the student housing sector matured. When employment was scarce and the recessionary trend for students to up-skill took hold, student numbers soared across continents. As a result, demand for student housing has risen dramatically, far outpacing supply in many instances. Due to recessionary low levels of demand, supply has been stifled.
Any developers warn that investing in student housing can be dangerous and frightening. It’s understandable that some people feel this way, given the possibility of students thrashing the spot. Student lodging, on the other hand, is a genuine part of the real estate market. Because of its rising economic opportunity, many businesses are now developing their business models around student housing. A progressively mobile global student population pursuing high-quality, purpose-built student accommodation has been critical to the growth of investment volumes. The largest beneficiaries of these students have been English-speaking countries, mostly the United States and the United Kingdom, which have led the way in providing housing to satisfy the increasing demand.
When it comes to real estate, job growth and demographics are two of the most common considerations to weigh. However, in this situation, student accommodation is mostly determined by high enrollment. Applications and their ongoing processes mean that a new area would be crowded with students, especially if it is near a university. You won’t need to manually advertise the student housing property to maximise occupancy if it’s in one of the city’s or town’s most lively areas. Since surrounding restaurants, art galleries, shops, and nightlife attract students to rent your housing unit, these areas become magnets for students.
In terms of rent increase, a third of off-campus student housing rentals have seen increases of more than 3%. Another 46% reported rent growth of 1%–3% in the previous year, while 43% reported negative rent growth. It also goes to show that when it comes to investing, position is everything.
Investors must remember, though, that the student housing sector is not the same as it was in the past: Higher tuition rates would almost certainly result in fewer students in the future. (However, some universities are already oversubscribed.) Students are now becoming more demanding in terms of lodging selection. In certain locations, developers and operators of purpose-built student housing blocks are posing a growing threat to private investors.
There are opportunities to profit from student housing investment without the hassles and headaches of handling the land or the investment. Passive investing options in student housing are available through innovative investment products and channels, such as online investment portals.
While some landlords have a derogatory perception of students who do not pay on time or who are troublesome renters, students are generally conscientious payers. The great thing about student housing is that they are either decent landlords or have a relative as a guarantor, ensuring that rental collections are not an issue. Often students choose to pursue two-year associate degrees or five-year undergraduate degrees. If they intend to pursue higher education, such as a master’s or doctoral degree, they will be able to stretch their living terms. Due to the length of time required for college, students will be long-term renters.
When compared to traditional rental properties, investors typically earn a higher rental income. To prevent distractions from their studies, students typically cosign with their parents or someone else is eager and able to pay rental fees on time. Students also remain in the same place until they finish training, which tends to increase occupancy rates.
When it comes to student housing, the safest advice is to diversify your portfolio by investing in a few stable properties run by reputable developers while still taking a chance on new properties in areas where demand is expected to rise. This will result in a more diverse portfolio, because that though one property suffers from unforeseen conditions, the net investment will be covered.
Rent regulation was enacted in some jurisdictions, preventing landlords from raising rents before they choose a new tenant. Unfortunately, this may be a major headache for them, especially if the current tenants have no intention of leaving. You are not permitted to ‘mark to market’ as a result of this regulation. Since they will soon leave after completing their undergraduate studies, you will still have new students coming into your property. Much of them move to look for a new place to settle, which could be closer to where they’ll be working soon.
The nature of the global student housing investment climate has changed. In 2013, spending in UK student accommodation surpassed those in the US for the first time, when looking at transactions greater than $7.5 million and excluding land purchases. Powerful transactional activity in mature markets has pushed yields lower as capital prices have risen in response to high demand and limited supply.
Higher college enrollment is common during recessions, particularly given poor work conditions and a lack of employment opportunities. This will result in a rise in the demand for student housing. In addition, each year, more people are earning college degrees—enrollment has been slowly rising and is expected to hit 17 million by 2029.
You don’t have to rent out the property to get into the student housing business. Real estate investment trusts, or REITs (here are the most recent student housing REIT recommendations), and real estate lending sites will also help you grab a slice of the construction pie. When it comes to student housing investments, there are plenty of resources and ways to benefit.
College housing investment is a pretty safe bet. Just a small number of colleges have gone bankrupt in the past, and when it comes to demand, children are born every year and would need education. In conclusion, student rentals are a substantial investment. You can get the best returns depending on the location you pick, particularly if it is near a university, coffee shops, restaurants, and workplaces. However, there are often risks associated with any investment. What you need to do is reduce and contain the risk.
Though college accommodations may look a bit different in 2020, we expect a return to normalcy on campuses. People, especially college-aged students, are intrinsically social creatures, and much of university life revolves around being physically present at school. Students will be excited to regain their freedom from their parents in the post-COVID period, and they will be prepared for it.