Student Housing – The Countercyclical Investment

November 2, 2016

 As university students have returned to their schools, real estate investors have busily watched occupancy rates, researched student population numbers, and examined local housing needs, all in an attempt to take advantage of the rental capital those students will pay this year.

According to Real Capital Analytics, $5.7 billion in student housing transactions occurred between January 2016 and August 2016, a $2 billion increase over student housing transactions made last year during the same period.

So what is the draw?

For many it is the ever-increasing rate of enrollment and constrained university budgets limiting their abilities to meet rising demands for student housing. According to the National Center for Education Statistics (NCES), enrollment in degree-granting postsecondary institutions was 13.2 million students in 2000, 17.3 million in 2014, and is projected to increase to 19.8 million by 2025.

Others invest in student housing because it caters to a recession resistant market. The NCES reported that during the 31 percent growth of enrollment from 2000-2014, only a 4 percent decrease occurred between 2010 and 2014 as a result of the 2008 recession. University enrollment also tends to be countercyclical to the rest of the economy; when jobs are scarce, workers seek out new degrees and advanced training to qualify themselves for new jobs.

Beyond meeting demand, off-campus, private student housing complexes often offer students a preferable option to on-campus housing.

The modern student housing complex gives students a living space that is specifically designed for them with a variety of desirable amenities.

Ari Rosenblum, a 15-year investor of institutional-grade student housing and Chief Executive Officer of Vie Management, has a programmatic approach to successful student housing investing.

“By seeking out smaller assets in secondary markets, we ensure we have a good entry point from a price perspective. Then we institute our added value program that includes furnishing the units, replacing old appliances, as well as upgrading the fitness centers and pool decks. When we add our resident-first management approach to the physical improvements made to the asset, we find students will pay more to live in an improved complex in direct proximity to a major college or university.”

Such is the case with Campus Edge, a student housing complex adjacent to Kennesaw State University Marietta Campus. “With the extensive experience Vie Management has in student housing and with student housing becoming a core asset class, we feel this strategic partnership will benefit both parties,” said 1031 Crowdfunding Founder and CEO, Edward Fernandez. “1031 Crowdfunding will provide the equity from the investors and Vie Management will provide a core, turn-key, strong student housing asset for those investors.” This project adds value for students and investors alike. Once the upgrade process is complete, every unit will contain high quality furniture and stainless steel appliances, an upgrade students polled said would be a premium option for which they would pay higher rent.

When asked why he invests in student housing rather than traditional multi-family apartments, Rosenblum said, “Pricing for student housing assets is generally more favorable than conventional multi-family because it’s an extremely operationally intensive business, which limits the pool of buyers. Every year you turn over 60-70% of your rent roll, which presents risk. But there are benefits associated with that risk, including the ability to increase your entire rent roll yearly if you add value to the complex.” At 1031Crowdfunding.com, we specialize in helping people find solutions quickly.

For more information on student housing or to view the Campus Edge DST, please visit 1031Crowdfunding.com.

Edward Fernandez is founder/CEO of 1031 Crowdfunding, LLC based in Orange County, CA.

edfernandez@1031crowdfunding.com or toll free at (844) 533-1031.

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