Especially after the pandemic, investors were very wary of student housing, a unique niche within the multifamily asset class. Aside from many students going home during the pandemic and the newfound question of the future of college campuses, there are a few challenges to student housing that keeps investors away.
⚠️ Student Housing Disadvantages
First, there is one major leasing period, and that is the summer time. If you miss that opportunity, many units can go vacant until after winter. Secondly, there is more turnover in student housing, as students move on and new students come in constant cycle. Last, but certainly not all, students can be a tougher resident. There are parties, petty roommate issues, the list goes on (I know well from my experience as a leasing agent while in college).
Why We Like Student Housing
Now, what makes student housing attractive and why do I like it?
1️⃣ Housing Demand: Aside from less competition from the traditional multifamily investor, I find student housing to have strong fundamentals. If an asset is well-positioned in proximity to a thriving and growing campus and there is a shortage of dorm space, the nearest student housing complex makes for a strong prospect. Especially in mature college towns where there is less space to build new properties, closely positioned properties are in high demand and it is not uncommon to see them fully or nearly fully occupied prior to the start of the school year.
2️⃣ Individual Leases: Secondly, student housing often times has a different lease structure. Whereas traditional apartment complexes are leased by the unit, student housing often does individual leases, or in other words, leased by the bed. So a two-bedroom, two-bath would have two renters, for example, versus one renter which would occupy a traditional two-bedroom unit. Why is this exciting? That is more renters per unit. For example, I recently pursued a very nice student housing property in Georgia. Listed at $18.2M for 112 units, the prices is $162k per unit. But since there are 194 beds (or 194 units), that translates to $93k per bed. Looking at the leased unit (beds versus units) differently from traditional housing, the price per leased unit is much lower!
3️⃣ Growing Student Population: Finally, I like student housing because there will always be college campuses. As long as we are in the developed world, society will valued education and educational institutions will continue to accept students (and charge rising tuition costs). While the overall student population continues, one could argue that many are going non-traditional paths of online education and community colleges; however, University attendance continues to be on the rise. As long as these trends continue and there is not local oversupply, the right student housing communities and locations have strong prospects for high occupancy and growing income!
Robinson Capital is honing in on university markets with growing student populations and looking to acquire fit student housing assets. We hope you will join us on this journey!
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