The rising student accommodation estimates suggests that there is an urgent and high need for student accommodation. A recent estimate that you should know is that investors spend about $8 billion in student housing during 2017.
Enrollment growth is the major driver of the high need for student accommodation.
If you are thinking about investing in student accommodation, there is no better time to do so than now. Here, we highlight 8 compelling reasons on why student accommodation is a lucrative investment venture that you should consider.
- Surging Student Numbers
Many young people are getting into tertiary education compared to yester-years. It is common knowledge that the number of students participating in higher education continues to rise. When you go through various projections, you will appreciate that student enrollment will continue increasing.
Analysts indicate that the demand will reach about 193,000 by 2024. With such numbers, we can expect to have more pressure on the infrastructure, including the need for more student accommodation units. Therefore, the surging numbers provided viable opportunities for investors to tap on.
- Under-supply by Universities
The high student enrollment numbers overburdens many universities. We acknowledge that the current capacity of universities cannot cater for the high accommodation demand.
Traditionally, students stayed in halls of residence where they studied. This is not common today because of soaring demand that has made the number of rooms on campus to be inadequate.
Today, it is common to find that only a few universities allow students into accommodation units. Even so, only a few of these students are allowed in halls of residence.
3. Recession-proof
Student accommodation is ranked as one of the most recession-proof investments. Do students stop going to university during a recession? Definitely not. In fact, more people tend to go to university during recession. The reason is that there are usually fewer jobs, thus making more school leavers to consider a course of study.
If you are not employed during recession, there is probability that you will consider enrolling for a course in order to advance your skills and knowledge. The aim is that people want to increase employability chances.
Therefore, one cannot doubt that because student enrollment is recession-proof, student accommodation investments will not be affected by financial turmoil. In fact, there is likelihood that an investor will have a higher income certainty.
4. Higher Net Yields
Compared to other profitable ventures, student accommodation yields high profits that you can tap into. Unlike the buy-to-let investment property, student housing garner more profits because they are considered as HMO investments or houses in multiple occupations.
For example, if you invest in a three-bed student apartment, estimates suggest that you could get yields that are three times more than the amount of rent earned. This sounds lucrative and you consult experts if you need more information about the estimates.
Of course, the higher net profit is the most crucial part because the core objective of any business venture is the maximization of profits.
- Lucrativeness of Purpose-Built Student Accommodation
Student accommodations are popular because they provide room for common study areas and Wi-Fi. It is common to also find many of them only a short walking distance from the university and near shops. When you invest in this sector, you will discover that students have an affinity for purpose-built units because of their convenience.
Investing in student accommodation spaces can enable you to do away with some of the limitations of HMO v. BTL investment. Apart from eliminating these disadvantages, you will retain various benefits, including higher yields and shorter void periods.
The bottom-line here is that purpose-built student accommodations are quite attractive to students, thus increasing the chances of the investor benefiting from this popularity.
6. Rent Guaranteed
Many people believe that students are difficult tenants. Why is it a common perception? It is because people think that students are likelier to default rent. However, this is a misconception that needs to be dispelled. From a rational perspective, students are good payers of rent.
In case there is an issue with rent payment, an investor can count on the parents as guarantor. The parents act as the rent guarantee that we are talking about. Therefore, fear of rental defaults should not be used as an excuse for not investing into student accommodation. It is worth noting that defaults are few; and may be unpreventable in all accommodation units.
7. Proper Management
The other fear associated with student accommodation is the issue of management of such property. However, you should be aware that property management is normally embedded into custom-built accommodation.
Such kind of management could be provided for you by the university or building administrators. As such, an investor can benefit from the investment management that is usually active on the ground.
8. Long-term Tenants
Investing into student accommodation is also lucrative because of the probability that students may become long-term tenants. Students take various years to complete their studies. After completing studies, they could decide to advance their studies.
Investors who can keep student tenants happy and satisfied have higher likelihood of maintaining them as tenants during the entire study period (between 2-6 years). This is unlike non-student accommodations that lack such tenant consistency.
Conclusion
The current state of student accommodation looks great, and any investor should take advantage of it. There are still plenty of opportunities for investors to venture into this maturing sector. With the industry projected to continue maturing, opportunities are market-specific.
You can make investment decisions wisely because information about the industry is increasingly becoming available unlike in the past. Challenges exist for sure, but these can be solved and cannot be compared to the opportunities the sector provides for investors. Investors will continue seeing strong returns from these investments, and if you have the ability, you could venture into it. The more important aspect is that projections indicate that it will continue expanding and maturing in coming years.
