The Pros and Cons of Owning and Investing in Student Accommodations
As of 2016, the total student housing transactions reached a record level of $9.6 billion according to Real Capital Analytics. This was up 62% from 2015 and amounted to three times 2014’s total. From the above analysis, you can be sure of another astronomical increase by the end 2017.
The thought of renting residential property to students probably does not leave a very good taste in the mouths of most people. Why would you buy a property only to have it ruined by immature, boozed up young adults? Judging from some of the stories you hear or may even remember yourself from your student days, you may be right. Nevertheless, the fact still remains though, students need somewhere to live and for the discerning buyer, this can prove to be an attractive investment opportunity. As predicted by the National Center for Education Statistics, the number of college enrollment in the U.S. will reach 19.8 million students by the year 2025. Hence, we of Hubilu Venture Corporation believe that the rate at which students will demand housing by 2025 will be astronomical.
However, based on our experience so far, it is essential to consider the Pros and Cons of students’ housing. This will further guide newcomers on how best to invest in students housing.
The Pros:
- Students are happy to live in houses that may not necessarily have the most up to date fittings. Meaning you can spend less on the investment and maintenance costs are reduced, as the expectation on new fittings is not there.
- Students typically live in groups, meaning that the rental return is usually strong. Students expect to be charged at market rates for lesser quality housing as they believe they are a risky investment.
- Long term contracts. Students are usually prepared to sign up for a fixed tenancy period as part of the tenancy conditions. This guarantees your rent for a set period of time.
- Added benefits. You may be able to charge students extra for services like lawn mowing or cleaning. Provided you have the time and energy to do this, it can be a good way to keep an eye on the property.
The Cons:
- Students will have parties and chattels-like carpet will suffer accordingly. Whilst replacing fixtures more regularly is not an appetizing thought, some consolation can be taken from the fact you can replace it with cheaper quality products.
- Upkeep and maintenance around the investment will suffer. Students often shy away from doing anything other than the bare minimum. This means lawns will not be mowed, gardens will not be weeded, windows will not be cleaned and showers will probably grow some sort of fungus!
- Paying rent may not be the top of the priority list for students. Falling behind in rent and chasing students up for payments may be a common occurrence.
- The value of your home may not appreciate in value in line with other homes due to the stigma attached to student housing.
Whilst this list is, by no means, a certainty and the issues do not necessarily apply to students alone, it is a brief warning on some of the things you may encounter. This is why Hubilu Venture Corp. is sensitizing investors to see the advantages in student housing and seize the opportunity. Furthermore, we are open to all potential investors who need real estate advisor assistance with property acquisition and development within the LA metropolis.
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