Tuesday, 22 December 2020

Student housing offers property investors a recession-proof option

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Student housing offers property investors a recession-proof option

Many investors are feeling a little wary as the world comes to terms with the changes brought by the Covid-19 pandemic, with many keeping their toes out of the water until they feel it is safe to venture out.

One area of property investment that has proved to be resilient is student housing. While similar in many ways to the multifamily buildings, student housing usually has an average of three bedrooms compared with one-and-a-half, and individual leases per bedroom for each student, rather than a lease of the whole apartment.

For northern hemisphere investments the lease will typically run from August to July for each bedroom, to accommodate the academic year (if investing in the southern hemisphere the academic year runs with the calendar year from January to December), with parents usually acting as guarantees and signing leases on behalf of their children. This takes a lot of the risk out of renting to effectively unemployed, young people.

When catering to students, investors need to take care to have the property full by September (or February in the southern hemisphere) as it will be extremely hard to find tenants once the academic year is in full swing.

Another factor to take note of is location – the buildings must be close to campus (no more than about 1.5km away, ideally) and/or transport to and from campus. Also, make sure the property is tailored to the needs of 18-22-year olds, an adequate WiFi connection is a must, and has become even more of a necessity with the increase in online learning during the pandemic.

Take care when choosing your property management team and be sure they understand the ins and outs of marketing, especially the differences between one-, two-, three- and four-bedroom options. Online investment portal Wealth Migrate, for example, have many years of international experience to draw on when guiding you through the process of investing offshore.

Students are notoriously sensitive to how they appear to others and living in the number one or two building can mean everything. If you find you have bought into a building that is not in the top two most popular, ask the operator what plans they have to improve it. This can include a more modern floorplan as well as the kinds of facilities that appeal to students.

The experience of some investors during lockdown shows that a pandemic need not put paid to your investment plans. Many students remained in their buildings, though there were changes in terms of the numbers of students on a lease to meet the requirements of social distancing.

Another issue to consider is the benefits of renovating existing buildings over a new development. The cost of construction has increased by double figures in 2020, so that is a big consideration to factor in – you will need to be supremely sure you can fill a brand-new building to take on that added risk. Repurposing an existing project will generally be less onerous for investors.

Student housing, which is now viewed as a recession-resistant asset base that has attracted growing foreign appetite, may be a new area for you but having a partner guide you through the process and a solid on-the-ground team can put in you line to get a distinction in investment.

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About Wealth Migrate
Wealth Migrate is a trusted global real estate marketplace which allows investors to safely invest internationally, in quality opportunities, thus achieving wealth preservation. They have members in 133 countries and have facilitated real estate investments of over $600 million USD on 4 continents with investors earning an average of 8% cash on cash in USD for the last 6 years and IRR’s of 13% to 20%. For further information please visit wealthmigrate.com