Is Student Housing a Good Investment?

Posted on 16. Aug, 2006 by in Real Estate

studentdorm.jpgDuring the last year or so of college my wife and I threw around the idea of owning investment property in our college town. During our college career we had both seen our fair share of horrible landlords (if there were any) and dumpy homes that were never maintained. We told ourselves that we would make great property owners and that we could easily maintain a nice looking home that could be rented out to four or six college kids. If we maintained the property, we were convinced that we could charge a bit more than the dumps in the neighborhood and still attract tenants.

Now that we’ve left that college town and are actually considering our investment options, it’s time to seriously consider an investment in student housing – but is it a good idea? Apparently off-campus student properties are providing good returns around southeastern and southwestern campuses, especially at public universities. But taking what you know about college students, would you want to maintain a house full of them?

One expert in the field of student housing ownership, Michael Zaransky, states “that for at least 20 years there will be a boom in the population turning 18 and a large percentage of them are choosing to go to college.” But do a large number of college students automatically mean that student housing is a good investment?

One suggestion is that your individual investment decisions should be made first on the ratio of university-owned beds to total enrolled students. The lower the ratio for the campus, the greater need for privately constructed student housing – and the greater demand for your off-campus property.

Another suggestion is to purchase property for your own children while they attend college. To help you purchase this type of student housing, the Federal Housing Administration offers something called a ‘kiddie condo loan’. This loan program is designed to allow both students and non-students to purchase a home with a blood-relative’s good credit standing and cash, according to MSNBC. These homes qualify for all tax advantages of a primary residence and require only 3 percent down. The owner-child can build a positive credit history as they escape from university dorm life.

But what happens when your son’s roommates are late on the rent? Can you deal with that awkward situation?

Although my wife and I are still researching the subject, student housing still looks to be a good real estate investment. Student housing properties bring in a steady positive cash flow (even after maintenance and insurance) and can even bring in enough to cover your mortgages. But when looking for college towns to invest in, look for areas with increasing rent prices that you can take advantage of – even if your child will never attend that school.

18 Responses to “Is Student Housing a Good Investment?”

  1. Kira

    16. Aug, 2006

    What I’d look for additionally are areas around univerrsities that have more graduate students than undergrads. Graduate students are always there at least 2 years, and are quieter and neater too. I wouldn’t want to rent to undergrads unless the opportunity was really good – they are likely to move every year and don’t have stipends like grad students.

  2. Penny

    16. Aug, 2006

    My husband and I bought a 2 bedroom condo, about 1,000 sq. ft +/- near the University of South Florida. We had it for 4 years. Same two students the entire time. We sold it for 40K more than we bought it. Good investment – you do the math?

  3. Terry McCahill

    28. Aug, 2006

    We are just about ready to roll out a site addressing this very issue. Thanks for the link. FHA loans are available…”kiddie condos” allow the parents to purchase NON-owner occumpied co-borrower with 3% down.

  4. FSBO

    22. Feb, 2007

    Yes, We think that student housing a very good invevestments.

  5. StudentRent

    15. Mar, 2007

    http://www.StudentRent.com – Your source for off campus housing! Free housing search, very affordable listings!

  6. Neil Simmons

    22. Jun, 2007

    I run an estate agency in Bangkok, and here I would say that student housing is not a good investment. Yes there is easily enough supply and your occupancy rates would be 99%-100% all the time, but the amounts received are just too small to get out of bed in the morning, with rentals for studio rooms being around US$40 per month.

    Over here, the luxury high-end market gets the best yields.

  7. Neil Simmons

    22. Jun, 2007

    In Bangkok the returns on student housing are so low that it isn’t worth making the investment, with students renting studio units for around US$40 per month.

    High-end luxury apartments get the best yields here.

  8. Jackie

    25. Oct, 2007

    Students here in Schenectady, NY reserve their housing almost a year in advance. It’s October now, and I am already signing leases for the 2008-2009 academic year. Students sign 1-year leases, even if they will only live in their apartment for 10 months. Parents co-sign, and parties are prohibited. I’ve been doing this for 20 years, and think it’s the only way to go.

  9. charles chambers

    03. Apr, 2008

    Good idea steady stem of regular tenants.

  10. steve jenings

    03. Apr, 2008

    Risk is over supply unless University expands campus.

  11. Steve

    09. Apr, 2008

    If you do not have a house in or near Big Rapids your student will be charged the following rate for housing!
    FSU Room and Board (19 meal plan) $7646.00
    If you divide this by the 9-month school year it equals $850.00 per month.
    If your student stays in FSU housing for 4 years this equals $30,584.00

    If you own a home in Big Rapids your student can live off campus immediately, “BUT” you have to show this address as the student’s home address when he or she applies to FSU.

    I have a property in Big Rapids that I would like to sell. We purchased this property for family members attending FSU that have now graduated. This property is leased through August of 2009 for $1,000 per month. Tenants pay all utilities.

    Asking Price is $110,000
    A 30-year mortgage at today’s rates are below:
    7.00% = $731.83 6.75% = $713.46 6.50% = $695.27

    This rental unit is four bedrooms with three baths and is located several blocks from FSU. Appliances have all been replaced within the past three years and there is plenty of paved parking. Property was renovated in 2002. We lease to one student and that student sublets rooms to three other students. We receive our rent check and we pay only mortgage, taxes, insurance, and summer lawn maintenance.

    If you are interested in saving dormitory costs, you must use a Big Rapids address as your student’s home address when they apply to FSU.
    If you are interested in this house please contact me: alaskan@chartermi.net

  12. JP

    21. May, 2008

    Student housing is a great investment if you know what you are doing, if you don’t you can get clobbered like many of the folks I’ve bought properties from- most competely mismanaged it and took a sound beating- doesn’t make them bad people, just people that did not know what they were doing.

    http://liveoffcampus.net

  13. Christine Daily

    24. Jul, 2008

    There’s some useful information on the UK Knight Frank site – http://www.knightfrank.co.uk – follow the links to student property or search for it, or alternatively go straight to the report:

    http://www.knightfrank.com/ResearchReportDirPhase2/11334.pdf

  14. StudentRent

    25. Sep, 2008

    Looking for free rental advertising? Try StudentRent.com! They are offering free housing search nationwide and several free listing opportunities for property managers.

  15. Dave Cook

    20. Jul, 2011

    The university is never going to move, so you should be guaranteed of finding a tenant for life!

  16. Beverly Frosch

    24. Mar, 2012

    My husband and I personally own a condo apartment in a university town. With 5 bedrooms and two floors, we have an amazing unit. After all the bills (tenants pay all utilities) we pocket $900.00 each and every month.

Trackbacks/Pingbacks

  1. Denver Lender » Buying where the students live - August 17, 2006

    […] School is around the corner and in a few days summer will officially be over. Colleges and universities around the country will be inundated with students. Some of them will live in dorms but the vast majority will live in off campus housing. The Bean Counter Blog offers up some interesting commentary on buying student housing as investment property. […]

  2. Loans for Students to Buy Homes | Pittsburgh Homes Daily - October 10, 2006

    […] I don’t have much to add on the subject as I have seen a number of resources about the pros and cons of buying student housing, both for your college kid and just as an investment. […]

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