Student housing is a very hot investment
Continuation of past columns: Real estate investment of student housing (hottest market right now) is very hot. It remains in high population growth rates such (from last week) as Arizona, California, Florida, New York and Texas.
Try to find housing near schools that have dorm space for 30 percent or less for students. Contact the university’s housing department to find out how many students the school can house on campus versus how many people apply for spots. Ask if there is a large-scale dormitory construction project in the works. If there is, invest elsewhere.
Try within one mile of the student center or main quad. Anything farther from campus puts you out of easy walking distance, a major turn-off to prospective tenants.
Make sure it is near public universities, not private ones. Private institutions often encourage or even require students to live on campus, and they’re more likely to have the budgets to build additional dormswhen needed. There are exceptions, however, so check the housing situation at private colleges in your area.
Example for my readers in New York: Ithaca College and Syracuse University, both in their namesake towns in New York are private schools that don’t have nearly enough dorm space for their students. There are many more examples, but everyone needs to do some home work of their own.
Challenges: Students can be tough tenants. Screen ALL of the roommates-not just the one whose name is on the lease. Many landlords provide a lease for each roommate. Also, ask for one month’s rent up front.
High turnover. Expect to have close to 100 percent turnover every year.
High maintenance costs. Plan to spend about $150 per bed per year on maintenance- that’s $600 in annual upkeep for a four bedroom apartment about 20 percent more than what is required for no student rentals.
Seasonality. You must rent out all of your apartments by the start of the school year or risk having a vacancy until the next semester. Since most students leave in the summer, getting rents in June, July and August can be difficult. It’s a good idea to ask students to pay for these months in advance.
Reputational risk. If you are not attentive to renters’ problems, word will spread around campus. Replace broken appliances and unclog drains quickly. It’s wise to hire a third-party management company 5-8 percent (especially in this market) of annual rental income. If possible offertenants air conditioning, parking and convenient access to washers and dryers. Students expect these amenities.
Favorite opportunities. A sampling of schools with attractive housing investment opportunities:
Arizona State University, Tempe.
University of Florida, Gainesville.
The University of Kansas, Lawrence.
University of Minnesota, Twin Cities.
The University of Texas at Austin.
An easier alternative. If you would prefer a professionally managed investment, consider a publicly traded real estate investment trust that invests mainly in student housing.
I hope everyone enjoyed their Labor Day weekend. Also, sorry to those readers that corresponded with me about the city council, water and sewer problem, and the millage rate. I can’t address them all. I hope everyone voted, if not don’t complain. Next week: how to make your vacation home pay for itself.
Have a real estate question? Write, call, fax or e-mail:
Bob Jeffries, Realtor,
Century 21 Birchwood Realty, Inc.
4040 Del Prado Blvd., Cape Coral, FL
239-549-5724 Office 239-542-7760 Fax