What is student housing? And why can investing in this type of property be a game-changer for YOU?
That’s what we’re going to talk about today. If you’re interested in getting into real estate investing so you can do things like…
- Replace your 9-5 income
- Work less
- Pay down debt
… then student housing is a great niche to get into. I’ve built a multiple 6-figure real estate portfolio renting to students, so I know first-hand it’s an effective way to scale quickly.
In this article, I’ll cover relevant questions and topics, like:
Want to learn more? Keep reading!
What is student housing?
Let’s start off with a quick definition of what student housing is.
As the name suggests, student housing facilities are properties that are rented out with student tenants in mind specifically.
So, let’s take a look at the different types of housing available (and why there’s such a huge demand for off-campus rentals near college campuses).
In the US, 22% of students rent out dorm rooms offered by their university.
So, students who go this route pay their school for room and board in addition to their tuition.
And, in exchange, they get to live really close to where they have classes and various campus activities, which is convenient… Especially for students who don’t have their own transportation.
A lot of colleges just don’t have enough space to house their entire student body.
Not only that, but renting on campus can be more expensive compared to renting a room off-campus (and I’ll talk more about this in a bit).
Now, in some cases, on-campus housing options have expanded to include private rooms and common areas, like a living room and kitchen space. Which is great, but… cramped dorm rooms are still the norm.
And for most students, the idea of sharing a room with strangers (who might have completely different schedules or lifestyles) isn’t appealing.
So, what else is there? That’s what we’ll look at next.
These days, the most popular student housing option is renting off-campus. In fact, 62% of students who don’t live with their parents choose this option.
But what does renting off-campus even mean? And how can you benefit from this demand as an investor?
Unlike on-campus dorms or apartments, off-campus housing is housing that’s not affiliated with a particular school.
In other words?
It’s a private housing market that YOU as an investor could tap into and benefit from.
So, for example, what I do is buy large houses in great college neighborhoods and convert as many rooms as possible into bedrooms.
Then, I market to students who are looking for safe, affordable housing options near where they go to school.
And it works.
I typically get 5-10 interested potential tenants within 48 hours of posting about my rental in relevant Facebook housing groups.
And since I offer good accommodation with private rooms, common areas, and the option to live with friends, students prefer it to living in a smaller space with people they don’t know.
(By the way, I wrote a separate article that specifically covers how to market your student housing rentals effectively right here.)
But, here’s something to keep in mind: Buying houses and renting out individual rooms to students is just one option.
For example, you could also rent out entire apartments.
In my experience, though, renting out individual rooms with shared common areas is the best way to maximize profits.
That’s because you can rent individual rooms in a large house for $500-$700+ each, whereas an entire apartment rented out to one student wouldn’t bring in nearly as much.
Alright, let’s dig deeper and talk about the pros and cons of on-campus and off-campus housing.
Benefits of on-campus housing
Why do students value on-campus housing? Here’s a quick overview:
- Close to classes, campus library, tutors
- Easier to feel a sense of community and participate in campus life
Drawbacks of on-campus housing
And what about the cons? Here are a couple:
- Expensive compared to off-campus options
- Dorm rooms tend to be small, and students live with people they don’t necessarily know
- Since colleges have limited space, getting a dorm room can be difficult
Now for the pros and cons of off-campus housing:
Benefits of off-campus housing
- More privacy and space
- Can be less expensive
- Students can choose to live with friends
Drawbacks of off-campus housing
- Typically farther from campus (which can be an issue for students who don’t have a car if public transportation isn’t a reliable option)
- Can be more challenging for students to feel connected to their university if they don’t live on campus
Alright, now that we’ve talked about some pros and cons, let’s talk about how you can make your student housing appealing to your target audience.
What to include in student housing offerings
Here are some things that student renters appreciate when they’re looking for a place to stay. Because remember: As a real estate investor, you want to offer housing that students will want to live in.
So, to do that, put yourself in their shoes and think, “If I was a student, what are some basics that I would need to have at home?” And then make sure to offer those things.
Okay, what kinds of amenities do students want?
Here are a few:
Today’s student population is more digitally-connected than ever before.
In other words?
Providing a strong internet connection in your student rentals is an absolute must if you want to rent to the right people.
Many students take classes remotely, have regular video meetings, play video games, shop online, and do all kinds of daily activities that require a strong internet connection. So, when you’re thinking about what amenities to focus on, this should be the first.
On-site laundry facilities
Doing laundry can be a real hassle for students. That’s why having on-site laundry is incredibly valuable.
This doesn’t have to be complicated, either. Just hook up a washer and dryer in a bathroom or in the basement with some cabinets or shelves to keep detergent and other cleaning supplies organized. This is a valuable addition to any rental.
Many students go to college far from where they grew up – in some cases, on another continent.
So, when they arrive at their university, they won’t have basics like a bed, a desk, a kitchen table and chairs, etc. with them. In fact, this is true of most students, even the ones who grew up in the area.
That’s why offering furnished accommodation is a great way to increase interest in your rentals.
Common areas for studying or relaxing offline
Again, when you’re trying to figure out what to include in your student housing rentals, think, “What are my target tenants looking for? What would they want to have in their home?” And then think about how you can offer that.
For example, students study a lot, which means they need a quiet place where they can do that, ideally outside of their bedroom.
But like anyone, students also need time to unwind after a long day. That’s why giving your tenants access to fun amenities like ping-pong tables is appealing to prospective renters.
Not all rental properties have a private garden or patio.
But, if that’s something you can offer, that’s a huge plus for students – especially if they go to school in an urban environment without much access to quiet outdoor areas where they can study or relax with friends.
As I mentioned, not all students have their own transportation. But, for those who do, having off-street parking is highly valuable, especially in an area where parking is limited.
Alright, how much does it cost students to rent on-campus versus off-campus?
This is an important question to ask yourself as an investor.
Because it will help you charge a competitive rate so you can keep your rentals fully booked (and ultimately earn more passive income).
But, keep in mind that how much you can charge in rent will vary a lot based on different factors, including:
- Where your rental is located
- The amenities you offer (laundry, off-street parking, and so on)
- The size and condition of your rentals
With that said, let’s look at some stats:
Cost of renting on-campus
- Students pay somewhere between $9,330-$13,620 on average for their room and board on campus, depending on what university they attend
Cost of renting off-campus
- Students who rent purpose-built student rentals pay an average of about $11,000 per year.
- Student-competitive housing costs an average of just over $13,000 per year.
Okay, once you have this information in mind, you can use it to set competitive rates, as I mentioned.
For example, what I do to help ensure that my rentals get booked is charge about half of what college campuses charge.
Understandably, cheap rent is one perk that makes my properties appealing to budget-minded students.
So, bottom line here: I recommend studying the market in your area and adjusting your rent with that in mind.
When it comes to attracting students (and the RIGHT kinds of students) location is key.
In other words, you want to rent in an area that has good schools and avoid college towns that are known for partying, drug use, and so on.
That’s because renting to mature students who are laser-focused on getting an education will help you avoid problems down the road – which is especially important if you want to reduce the time you spend managing your properties.
I talk more about this here:
Alright, let’s answer a big question before we wrap up…
Should you invest in student housing?
Student housing is a great real estate niche to get into this year to maximize profits long term.
In fact, here’s a quick stat that shows just how sought-after student housing really is.
In the US, student housing vacancy rates over the past few years have been hovering around 2%.
Which means that student housing investors don’t have to worry about finding students. Clearly, the demand is there. But is it likely to continue?
There’s good reason to think so.
For example, according to a recent report, twelve states (most notably California, Texas, Florida, and Georgia) are projected to have an increase in student enrollment of over 130,000 in the next five years.
And, unsurprisingly, all those students will need to find housing options near campus, which will drive up demand.
But as a student housing investor, here’s another thing to consider: You don’t have to limit yourself to renting to students only.
You can use the student housing rent-by-the room model and rent to people who aren’t necessarily students.
Let me explain:
What’s great about investing in large properties and renting out individual rooms is that no matter what, there will always be a market for affordable housing.
For example, you could rent to…
- Young professionals who want to save money on rent
- Retirees who have decided to downsize and don’t mind sharing common areas
- Healthcare workers who are often away from home and don’t want to spend a lot of money for a whole house or apartment all to themselves
As you can see, you have options.
For example, if you’re in an area that has great hospitals but few universities, you could use the rent-by-the-room model but tweak your approach to attract healthcare workers instead of students.
So, what is student housing and why is it a good real estate investment option for YOU?
Now you know.
As you’ve seen, there’s plenty of room in the market for new investors, and this particular real estate niche of renting by the room is a great way to maximize your returns.
Okay, so maybe you’re thinking, “I want to get started in real estate, but I don’t know how.”
In that case, I’ve got you covered.
I used to be exactly where you are: I was a newbie, I wasn’t sure what I was doing, and I made a LOT of mistakes along the way.
But now, I’m earning enough from my rental properties that I can retire – even though I’m in my early 30s.
That’s why I’ve decided to start coaching people who want to do the same. If you’re ready to skip the expensive mistakes I made and scale a lot faster, you can reach me here.