THE BIG PICTURE
INVESTING STRATEGIES
Student Housing Boom INCREASING HIGHER-EDUCATION ENROLLMENT POINTS TO OPPORTUNITY IN RENTAL INVESTMENTS.
by Brice Willis
tudent enrollment in U.S. univer- sities and colleges has been on an upward trend for the past decade, and it is expected to continue throughout 2016 and beyond. As President Obama noted in his State of the Union address in Jan- uary, “By 2020, America will once again have the highest proportion of college graduates in the world.” The National Center for Education proj- ects substantial growth in postsecondary enrollment through the year 2021, thus in- creasing the demand for student housing. Our company, Stonemont Financial Group, a national student housing real estate investment firm, projects as much as 3 to 6 percent rental rate growth in some markets. Our evaluations still show there is a healthy dynamic between supply and demand, and it should continue to support strong rent growth and rising occupancy rates, making now the ideal time to invest. Although the Federal Reserve increased interest rates in 2015, lending costs still remain at historic lows. Interest rates are, in fact, intended to rise, but the increase is expected to be gradual. Delaying an invest- ment decision on student housing is not encouraged, as the lending environment is not expected to improve in the near or intermediate term. INVESTING IN A PARTNER If an investor lacks prior experience, breaking into the student housing in- vestment market can be tricky without the right partner. Plunging into student housing investments should be done S
alongside a trusted professional who has the experience to help map the rapidly changing territory. Investors should seek out partners who have developed and purchased student housing in a market with similar profiles. Some characteristics to consider are the maturity of the markets, the school sizes, the competitive landscapes and the types of construction. Suitable partners will be knowledgeable on the future developments in the potential market. Insight on the likelihood of new entrants into the market, other student housing project approvals, the school’s addition of on-campus hous-
ing and so on should be readily available. Well-versed partners should understand the dynamics of each market and have the ability to find the hidden gems. For ex- ample, some flagship universities provide name recognition that can be beneficial. However, secondary and tertiary markets with strong enrollment and development opportunities due to a limited amount of purpose-built student housing can also show great promise to investors. When searching for the right partner, investors should look for someone who is not only knowledgeable on the different student housing markets, but the business
TOP 5 AMENITIES ATTRACTING STUDENTS
2
3 Clubhouse with recreation area, fitness equipment, study rooms or computer labs
4
5
1
Reliable high- speed Wi-Fi
Large resort-style swimming pool
Security features (keyless entry, controlled access, gated community, etc.)
Location near both classrooms and entertainment districts
48 | think realty magazine | may :: june 2016
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