There used to be a time when college or university students had just a few options available to them when it came to student housing. They could live on the campus, rent a flat in the town or choose to stay with their parents and commute to the campus every day. None of these options were too appealing for the students. An average dorm in the United States colleges tends to be more than five decades old, while flats in college towns are notoriously run-down. Most college students additionally do not prefer to live with their parents. Hence, students are now flocking to specialized students housing projects developed by renowned companies like Nelson Partners.
With the growing popularity and prominence of student housing, many real estate investors are now realizing the incredible opportunities lying in this domain. A lot of them have chosen to invest in multifamily residential properties around college campuses to enjoy above-average returns. Many of them are investing in premium purpose built student housing projects as well. Even though cap rate spread between typical conventional multifamily and student housing is gradually compressing in certain areas, student housing cap rates still run a bit higher than conventional multifamily housing. Student housing also has continued to appreciate at attractive rates for multiple years.
Student housing can take a number of forms. It can be as large as a traditional dorm and be equipped with modern amenities like a fitness center or swimming pool. It can also be small as a duplex that a local landlord rents out to a group of students. The overall breadth of student housing opportunities plays a major role in enabling investors of all sizes to enter the market. A lot of people who invest in student housing have a personal connection to college towns, thereby making real estate investments in those regions pretty attractive.
The most important aspect that highlights the appeal of making student housing investments is the fact that such properties are considered relatively recession-proof. When the economy goes down, college enrollments tend to go up. This invariably increases the demand for student housing projects. The stability of cash flows present in student housing investments is one of its key highlights.
Anyone planning to invest in student housing property must pay heed to its location and distance from the campus. According to reports, properties that are located close to the campus ideally outperform further-out rentals in terms of both occupancy levels and rent growth. The out performance among this cohort of properties indicates that demand has been and will continue to be stronger for properties that are located near the campus. While student housing properties located further from the campus are by no means doomed to fail, but a clear trend has been witnessed in the greater prominence of the ones enjoying better proximity to the university. Hence, companies like Nelson Partners always focus on developing student housing projects near the campus.
