The last decade and a half have seen the rise of the student housing sector in the United States. However, the interest toward it has truly only picked up as of late.
Experts say that now is the best time to build student housing. The outlook is bright, as university enrollment is expected to increase to about 12 million in the next 10 years. Thanks to several on-campus accommodation challenges schools face, there’s no way for the demand to go but up.
In addition, any HUD multi-family lender would tell you that financing is generously pouring for aspiring investors.
But just like any venture, student housing is not without risks. You should be fine if you’re able to calculate them thoroughly; the problem is when you fail to recognize them before you enter the competition.
Here are some of the challenges:
The most obvious one, the number of investors and developers playing in this real estate arena continues to rise. It’s not just even in high-profile universities, but campuses located in towns are slowly becoming saturated with accommodation choices for students.
No thanks to this, you may have to keep your rent low to stay competitive and keep your occupancy at a decent level.
Historically, student tenants are notorious when it comes to wear and tear. This means you need to allocate more money for renovation on a regular basis to keep your units in good shape. Unless you study this aspect carefully, all of your revenue might end up in this expense.
Expect long periods of vacancy every now and then, as students usually go home for the holidays. From a business standpoint, you’d want your investment to make profits all year round. Until you find a way to keep your student housing profitable during dry seasons, the income potential of your investment might be limited.
Student housing is a rewarding venture that requires careful planning. Without doing your due diligence, you might succumb to the pressures in this business quickly.