Real estate investors will look for any way to make money.
If there is any chance to put more in their pocket or bank account, they will try anything.
The most recent example is they are starting to get into student housing on college and university campuses across the nation.
They are starting to see the money they can make, and at a relatively low risk.
In the past, they would bid more on apartment buildings than properties.
But that started to change in 2014.
As the story said: “Investors are pouring money into the student housing business as new buyers enter the market. In 2014, these new buyers filled in for the largest real estate investment trusts (REITs), which were temporarily not buying properties after some bad earnings news hurt their stock prices. Now in 2015, the REITs have returned, driving property prices for student housing even higher. Prices for student housing are starting to look high even compared to prices for apartment properties overall, relative to the income from these assets.”
“REITs are actively looking to acquire that core, pedestrian-to-campus product,” Ryan Lang, head of the student housing division at ARA Newmark, an investment advisory firm that focuses on multi-housing properties, told the website.
The story added that’s a big change from 2014, when the top student housing REITs, EdR and American Campus Communities, bought just a handful of properties, accounting for just 3 percent of transactions. It continued that a long list of new investors have also joined the bidding for student housing assets, including high-net worth individuals, private equity fund managers and institutional investors.
“There have been a flood of new entrants into the space,” Lang told the website.
Prior to 2014, there wasn’t much competition for housing on college campuses.
With more and more investors wanting to get their taste of the pie, it’s going to be harder to get in on the action.
The reason college students are a low risk is because even if they leave after their lease is up, there are plenty of others who could take their place. The demand is high, especially if you offer a good place with plenty of room.
For those who fret over the damage they could do, that’s what the lease is for.
Get with a lawyer to make sure everything is legal, and specifically layout your rules for the house or building. If they break the lease or any of the rules in it, you have legal standing.
In terms of financial risk, the story covers that too.
“Investors used to pay less for student housing properties than they did for apartment buildings relative to the income from the properties. But that risk premium is eroding. The average cap rate of 6.1 percent recorded for student housing properties in the first quarter is just 20 basis points higher than the 5.9 percent average cap rate that investors paid for multifamily properties overall, according to RCA.”
The story added that other data firms show similar results. The story said that tap rates for student housing properties were 6.2 percent on average in 2014, 60 basis points lower than the year before, according to ARA Newmark. That’s only 15 to 20 basis points higher than the average cap rate for apartment properties.
It’s not just houses either.
Developers are getting in on the fun as well.
The story notes that, “Developers are on track to open new student housing communities at a rate of 40,000 to 50,000 new beds a year over the next two years—about in line with the demand for new student housing.”
If you’re an investor and have yet to get in on the housing on college campuses, you best act quickly before you run out of time.
HomeVestors of America® is the nation’s only real estate investing franchise, providing wonderful business opportunities to real estate and investment professionals across the nation.