Student Housing PROs and CONs

[Gaetano Ciambriello]

I have been investing in student housing for over four years now. I have a partnership with my brother-in-law and brother. We have learned quite a bit during that time and have had some wins and losses (learns). Here are some reasons you might want to invest in student rentals and a few challenges to keep in mind that you will need to overcome!

We currently operate 31 units in Connecticut. The goal is to keep buying in our market. Down the road we will look at other schools and opportunities.

I am happy to answer any questions you have on the asset class!

Why I Love Student Housing

Rent Premium - Students will typically pay 40-50% more in rental income than market rate housing. Parents typically foot the bill, so students are not as price sensitive.

“Guaranteed” Rent - Parents will guarantee every single lease we sign. If we get 4 students on a lease, we also have one parent for each student. That is a total of 8 people on the lease. I know other student rental investors that do not require guarantors because of the additional administrative work and they say that the social pressure of not paying rent is enough insurance.

Low Vacancy - LOCATION is everything with student rentals. They want to live near the campus, bars, wherever the action is! If you buy in the best locations, you will never have to worry about your house being vacant. I see many first time investors make the mistake of buying in a college town, but not where the students want to live.

Business Sprints - You work like a lion in this business. Lots of sprinting and longer periods where there is minimal activity.

1. Leasing season is 2.5 months of non-stop tenant inquiries and requests. If you do not rent during the “leasing season” you may be in for some trouble.
2. Tenants turnover the same time every year. During that two week period, you are jamming non-stop. Inspections, renovations and touch-ups, and then cleanings to get the property ready for the next group.

Student Housing Challenges

Yearly Turnover - Every year you have tenant turnover. Some schools will allow underclassmen off campus, some won’t. Depending on who can live off campus will determine if your turnover will be yearly.

Management Intensive - You are not dealing with one family, but four students in a house. They move in with their parents. That is now 12 people inspecting the house. Once the four students are in the house, you will hear from the girls often with maintenance requests. You need to have a streamlined process to deal with inbound requests. There will be many.

Neighbors - You are not going to be a fan around town when you rent to college students. Make sure to introduce yourself, let them know they can reach out should they ever have a problem and let your students know they must be respectful. I recommend students introduce themselves to neighbors when moving in. Bonus points for bringing cookies or brownies.

Decision Makers - You are dealing with 12 people when leasing a home vs. one person for a regular home. You have four students and eight parents. Everyone has an opinion on the house, the lease, how much rent they should pay, what items to redline in the lease, etc.