In light of all the stories about lower housing starts and a softening housing market I thought this was interesting when I came across it:
STUDENT HOUSING SHORTAGES: NEXT INVESTMENT <!—-> <!—->OPPORTUNITY<!—->? <!—-><!—-> <!—->
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NEW YORK (nytimes.com) – According to Kenneth T. Rosen, chairman of the Rosen Consulting Group, a real estate and economics research company in California, “The student housing market is a good niche opportunity today. The demographics are excellent, and the demand is great.†Echo boomers, children born between 1982 and 1995 to baby boomers, are about 80 million strong. College enrollments have been on the rise while the supply of on-campus housing is dwindling. <!—-> <!—->
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Student housing projects are often leased by the bed, with parents increasingly guaranteeing the leases. The student housing market, which is estimated at $160 billion, has proven profitable for many investors. Capitalization rates can often exceed those on conventional multifamily projects. <!—-><!—->
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Typical investors are independent companies and regional investment groups. Some tenants-in-common programs (TICs), offering fractional ownership of properties, also invest in student housing. Recently, three real estate investment trusts specializing in student housing have emerged — GMH Communities Trust, American Campus Communities and Education Realty Trust — making the sector more accessible to passive investors with less money to invest. <!—-><!—->
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Through July of this year, American Campus Communities had a total return (price appreciation and dividend) of 10.07 percent while Education Realty returned 28.76 percent, according to the National Association of Real Estate Investment Trusts. By comparison, the total return for all equity REITs during that period was 16.12 percent, the association said. <!—-><!—->
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Typically, student housing occupancy is near 100 percent. “The success of these investments is tied to college enrollment, not to external economic factors like job creation,†Michael H. Zaransky of Prime Property Investors and author, said. “In fact, one can argue that in bad economic times, people will want to pursue better credentials and go back to school.†>>>> <!—-><!—->
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<!—->Does anyone do anything specifically geared to investing in any student housing? <!—->
“It’s always better to have regrets for things you’ve done than for things you wish you had done………..”ponytl
Replies
I did but I see the light at the end of the tunnel with out their business . A much brighter light .
I believe they are the reason for the shortages.
Tim
I noticed a key phrase in that article, "with Parents gauranteeing the ..."Still not worth the hassle, I'm sure for all the damage.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
what do you suppose..
1 out of a 100 will only get beat up and the rest will get thrashed...
Life is not a journey to the grave with the intention of arriving safely in a pretty and well preserved body, but rather to skid in broadside, thoroughly used up, totally worn out, and loudly proclaiming<!----><!----><!---->
WOW!!! What a Ride!<!----><!---->
Forget the primal scream, just ROAR!!!
when do you sleep lately?
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
went on on a diet...
quit smoking...
quit drinking..
ditched the wimmen "friends"...
quit work..
qutting sleep seemed like a natural...
Life is not a journey to the grave with the intention of arriving safely in a pretty and well preserved body, but rather to skid in broadside, thoroughly used up, totally worn out, and loudly proclaiming<!----><!----><!---->
WOW!!! What a Ride!<!----><!---->
Forget the primal scream, just ROAR!!!
Edited 8/23/2006 7:20 pm by IMERC
Im glad youre fishin.
Theres not much left.
Tim
it was all putting a kink in my fishing time..
Life is not a journey to the grave with the intention of arriving safely in a pretty and well preserved body, but rather to skid in broadside, thoroughly used up, totally worn out, and loudly proclaiming<!----><!----><!---->
WOW!!! What a Ride!<!----><!---->
Forget the primal scream, just ROAR!!!
BTW... cut the coffee back to a littless than a pot a day...
Life is not a journey to the grave with the intention of arriving safely in a pretty and well preserved body, but rather to skid in broadside, thoroughly used up, totally worn out, and loudly proclaiming<!----><!----><!---->
WOW!!! What a Ride!<!----><!---->
Forget the primal scream, just ROAR!!!
Ive pretty well done what you have .
One cup of Mc Donalds every morning and an occaisonal International Belgium in the evening . I had to quit coffee when I quit smoking . Wasnt so bad that way.
Tim
I don't know if you realize it or not, but the article is talking about huge dorm-type projects- not single-family houses with 3 beds. We're currently building an 800-bed, $60 million project for American Campus Communities in Newark. They do very well in their market sector.
If you went the single-family route, it'd be just like any other rental property, through with greater turnover, and probably more property damage. Couldn't hurt to try it if the local college exhibits a need for housing, though.
Bob
No, I realize what it refers to, Bob. But those large projects are indicitave of potential in smaller projects. Sometimes positively. Sometimes negatively.
IF you had several small complexes or individual houses primarily geared to students and a university was building a very large project then it would certianly impact your investments.
Conversely, if there were not many large complexes your smaller ones might do better.
There are a lot to the dynamics of student housing.
"It's always better to have regrets for things you've done than for things you wish you had done..........."ponytl
ic.. most of the single family student housing i've seen is a one shot deal
you buy the house when your kid is a freshman.. they live it while they are at the school
after the 4 -5 years , you have a better feel for the market and decide to hold or sell when they graduate
your kid shares the house with other kids to defray the expense and acts as the owner's live-in agent
sometimes it works great
Here's the story of one of my clients when he was in college.his Dad co-signed for a house purchase. Like most housing hear campus, it was in need of fixing up.He moved in and rented rooms to other guys, but he had them help fix it up while there. New paint and carpets sometimes plumbing or roof repairs. Now and then a new dooor or two. Sold every year and did it again. Made good profits and his tenants were his roomates so they had a moral investment inthe place and were less likely to be trashing it.He leaarned real estate along they way and ended up a few years later as the VP of real estate division for Morgan Stanley, doing commercial RE all over the world.Then he started his own fund. Super wealthy now.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
After you been bit in the butt a few times you start looking behind you tryin to figgure out how to avoid it the next time .
You start heavy profiling case by case .
So other than your example , most are not what you would want in your life efforts to have their party in.
Most dont have a job and arent paying for their education or anything else for that matter because they havent learned it yet. They dont even know how to run a house hold period for they have 0 experience.
They have 0 experience of the minimal education of taking care of a house. They dont know and they dont think because mama is sending those checks. On move in day papa or mama writes the check for the lease and signs it . The student is not financially good for it . The parents sign the leases just like they sign note payments on those new cars . I take the parent to court , not the student and have several times. Which brings up another point.
The parent doesnt think. What else could it be ? They buy thier pride and joy a new car and sign the lease for an 80,000 dollar house . They think the deposit will cover the damages but miss the legal wording in the lease that they are liable for what ever damages there may be as the deposit is only a cleaning deposit . Its not a destruction permit . They have a probem when you come up with a few thousand dollars worth of damage . It normally takes a judge to convince them which takes 30 days to get a judgement . I love digital cameras showing time and date .
Tim
campus housing is a gold mine...i am dead serious.
my best friend bought one half of a duplex on Drexel Universities camous in Philly. His mortgage pyment was $1100. The monthly rental payment was $2900. The place was a real piece of ****. He took me to see it one saturday about 3 years ago and it was disgusting. There was a three story open staicase with a beer bong funnel running down from the third floor to the first. I saw a disaster...he saw a dollar signs
There is so much demand for housing
We sold our double north of Ohio State University about a year and a half ago. Owned it for about 8 years and had good tenants and bad. i found out it's a mistake to think that a large, nearby student population meant it would always be filled (OSU is second largest in the country, after Texas i believe). And if you can get good, studious tenants, they're worth their weight in gold. But then there are the others . . . i loved that house, but selling it was one of the happiest days of my life.
loved that house, but selling it was one of the happiest days of my life.
Another guy that has been in the trenches of college rentals .
You know , unless youve been there its hard to express it . Did you know you can make a fortune doing carpenter work? <G>
Yes , Ive had serious college tennants and Ive rented to four professors. Ive got three , 3bed 2 bath houses sitting around the university. Thats actualy the reason I own them. One I even built to cater to the faculty. Its a block away.
I was planning more if I could find them until reality struck me and I pulled up on the reins.
To be fair I will take the good tennants for an example . They come in the fall and leave in the spring . Some want to keep the house all year . This is a new problem.
Since 911 no insurance company will cover vandalisim , or terrorism. They have all sent out their notices. They will not cover an unoccupied house . So that carries many problems I wont get into.
One note to that to reflect back on an earliar post is that it changed who has to be responsible . Since I cant buy insurance for it , the lessee has to be able to stand for the loss.
Through time the best tennants I have and have had are the ones who stay in place from year to year . Not transients. I have one family thats been with me 10 years. One professional lady has been with me 5 years this month. She lives in the best rental I have which is the new one I built.. She grooms the yard and has added flower beds adorning the yard. She bought shrubbery and added borders. She has 4 humming bird feeders and several bird houses plus a mega feeder . Inside the house , it still looks like the day I completed it . Only cleaner . It smells good and so does she . Those are the quest of a landlord and makes one happy.
I wouldnt trade five of the best college tennants for one of those . The longer one has paid off more than half the note . I could sell the other one any time for top price with out any remodeling . The investment value is very strong on those .
Tim
Edited 8/23/2006 11:09 am by Mooney
Your experience and mine has been very different in renting to students.
However, it sounds like you were renting to some freshman or soph. frat rats.
My student tenants have generally been older students who went back to school to finish up after working or were getting advanced degrees. I had very little problems with them. Most stayed several years and left on very good terms with me. Some were married and had a working spouse.
Only partly negative experience I had was with two younger girls who rented from me once. They always paid on time but they were always calling about everything.
"It's always better to have regrets for things you've done than for things you wish you had done..........."ponytl
see my later post
Good points but I'm not aware of any changes in our Texas policies for vacancies like you describe.
Here the standard policy is good for up to 90 days vacancy and you can get an endorsement after that for more money. But if you are going 90 days on a rental then you must be doing some major overhaul.
"It's always better to have regrets for things you've done than for things you wish you had done..........."ponytl
Hmm .
During on going construction or remodeling its covered unlimited. Just says on going.......... This ones been going on fer a while . <G>
Ive got one like that so I looked it up instead of asking .
Have you checked your policies? I know its a THRILL to read through one .
be its better to ask for forgiveness than it is permission.
Tim
That's been done a lot. I've sold some places to parents for their kids in the past.
I was in San Marcos Texas recently and Texas State University has really had an impact on the housing market there.
Every house, mostly older houses, close to the university is student occupied. The large apt. complexes seem to be full. I don't know much about the dorm situation.
"It's always better to have regrets for things you've done than for things you wish you had done..........."ponytl
If you're interested in investing in student housing, you can own and maintain a single family/duplex/4-plex close to a college campus, or do it the easy way, buy shares of the 3 REITs specializing in this area: ACC, GCT nad EDR.
For more information on these than you probably were looking for, the following is an excerpt from a posting last month by Ralph Block, the Author of "Investing in REITs" from over at the Motley Fool forum:
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"Regarding EDR, Green Street Advisors initiated coverage of the two principal stocks in this small sector a couple of months ago and, based upon its analysis, American Campus, and not Educational Realty, is the quality name here. This is based upon track record (as a private company), delivering best on guidance and forecasts since the IPO, and a very strong and experienced management team.
This is a new sector for all us REIT investors but, after reading Green Street's research, I have taken a modest position in American Campus (ACC), but not in EDU. (Our clients don't own either, due to the unseasoned nature of this sector). As of the end of June, Green Street had a "buy" rating on ACC, and a "hold" on EDR. Green St's NAV for ACC and for EDU are $26 and $15.56, respectively. Today ACC stock trades at about an 8% discount, and AFFO growth is expected to grow at a rate exceeding 10% next year and in 2008. Being new IPOs, dividend coverage is weak, based upon forecasted 2006 AFFO. ACC is earning 91% of its payout, but EDR only 68%.
The student housing business is less exposed to the US economy, e.g., job growth and GDP growth, etc, but the leasing season is more volatile as virtually all the turnover risk occurs within just two months (late summer). Cap rates are modestly higher than for apartments, but Green Street wonders whether the spread is narrower than it should be, given that same-store NOI growth for apartment owners is expected to be higher than for student housing owners over the next 18-24 months.
Nevertheless, the student housing space seems to me to be a viable sub-sector, and should be considered by those interested in maximum diversification. A positive: Competition for student-tenants is fairly limited, as this is a very specialized business. On the downside, there is limited alternative uses for these assets. Look for situations where college is growing in enrollment, and with assets very close to campus; exposure to competition is minimal in these situations. Also, it helps to have a close relationship with the college trustees, as student housing owner and college are often able to help one another.
As noted, I have a small position in ACC, but would like to increase it if this REIT continues to stick to its knitting and perform in line with expectations. I am always cautious of new REITs, but some of them do quite well, given a reasonable amount of seasoning and a strong management team.
Ralph "
BruceM
Thanks for the info on REIT's. They've been around for a while. A friend at the trust department at my bank talked to me about them back in the 80's when they first started coming out.
"It's always better to have regrets for things you've done than for things you wish you had done..........."ponytl
Does anyone do anything specifically geared to investing in any student housing?
I used to provide in-town property management services for when the properties inevitably turned into rental units--but many of the local RE joints all seemed to have one leasing agent who would talk folk into paying less, and then delivering even less than the cost reduction. Back then, I had a good enough 'regular' job to be ugly to folk who bailed just for a short-term price cut and came groveling back. Which was stupid then, moreso now--that's life.
Here in Brazos County, the economics are there, if on razor-thin edges. If a parent had ready cash available for the downpayment, and could therefore skip PMI, the note on a "stater" 1300sf 3/2 2-car garage place (call it $95-110K) ciphers to around $385-450/month. A 675-750sf 2/1 apartment runs around $725-775/month; a 2/2 about $800; 2/2 duplex in one of the "student ghettos" runs about $900-950, more with a fenced yard.
So, getting your kid into a new house means a bit less in rent; they bring in a roomie, that's another $300-375/month--that's starting to get pretty economical, as long as your kid does not flunk out, drop out, or the like.
There's probably a pretty good scheme a person could set up, where a parent co-signed with the child on the house, took all the "first-time buyer" breaks possible, then worked out a deal where as long as grades held up, and bills were paid on time, the student could either take the house as property or take the equity or some similar inducement.
Right now, I've been recommending a VAR, treating the student as a very temporary tennant. Then, if no other of your own kids enroll, you then can either do a refi, and get into the renatl biz, or sell in our booming market ans let the buyers cover the balloon payment, etc. Mind you, the parent I talk to are going to have students here for 9-12 years in a row, too--so that can be a good deal for all hands.
In '85/'86 I worked for a rental company, doing maintenance and re-habs. My supervisor and I took care of about 35 properties, half of which were student housing. I don't recall the students being any better or worse than any of the other tenants. There were good and bad in both areas.
The boss owned the largest real estate agency in town, and kept adding to his collection of rentals.
About 5 years ago he and some partners put up a number of large apartment buildings in the college area, after buying and tearing down an old foundry and industrial site. I had heard that they were at 70% occupancy 2 years ago.
DW belonged to ther local landlords association, and told me how at one meeting the other people were b!tching about how much tougher the student market had become, with the new large projects taking the best renters.
we were looking into getting rentals at the time, but decided against it. Some of the properties listed for sale that we looked at had "for rent" signs up for the whole school year. I think the area is over built, but hey........I've been wrong before.
BIL/SIL have 4 student rentals and have kept them filled, with only one major disaster. (students shut off the heat over Christmas to save on heat bill, and broke the pipes when the pipes froze)
Bowz
I think we could talk different senarios for a month, but it would be all area differnces.
Theres a lot of different information being given in this thread. Im now wondering how much is realitive but its a treat to have a rental thread running .
The big apartment complexes are duking it out here . One guy actually had to steal the business away with washers and dryers plus one months free rent up front .
I believe most of this informnation is apartments . They make better money per sq ft but carry the most unexperienced tennants . With that causes more proplems of people living together that dont respect each other or havent learned how to get along .
Houses are homes to families and shouldnt be rented to students. I wish you would have bought houses . They do like houses the most because they can triple up on the rent and have parties with out the police knocking on the door. They are less likely to get caught with drugs and its easiar to have sleep overs but they end up staying too often.
Mebbe its because I m in the rural South surounding a small college. I dunno but I hate students for tennants . We all do here .
Tim
One guy actually had to steal the business away with washers and dryers
BIL/SIL provide coin operated washers and dryers in their student housing. It is a draw for the tenants, as well as a revenue scource
Tim, I'm gonna be quite busy in the next few days. If I don't respond it is not because I'm not interested. Maybe we can pick it up again next week? (Also trying to get through all the fest pics while being on dial up!)
Bowz
One point not covered: be wary when buying existing student rental property. Owners of such properties generally don't maintain them, in addition to the tenant abuse issues.
The "average" that I see is in poor condition, a few should probably be condemned and their owner/landlords jailed.
Furnaces and water heaters are often dangerous in the stuff I see, and electrical systems are often hacked beyond belief.
Fighting Ignorance since 1967
It's taking way longer than we thought
I've been in the student rental biz for 13 years. I've managed large undergraduate complexes, but for the last 10 years have just been doing some of my own on the side (a couple 4-unit places near a university).
I stick with Graduate students only (no undergrads). This helps becasue they don't party as much, and they know what their credit score is and realize how damages/judgements will haunt them down the line.
I blieve it's true that they are a stable investiment, vs being tied to the larger economy. However, they local market does swing back and forther through the years with the total availability of housing stock.
For example, ther was a time here that landlords actualy held auctions on the front porch of a place and the high bidder got to rent the apartment. That climate lead to several large-scale complexes being built, and then the town occupancy rates started moving up because of competition.
The last 7 years have been a poor time to buy. Everyone wanted "IN" on rental investments after the stock market tanked in late 90's, and purchase prices went sky high. That's turning around now though (after new investors found out that being a landlord involves WORK). The market has shifted to a buyers market now, and I'm looking to add more property soon.
Student housing has been great to me personnally.Ithaca, NY "10 square miles, surrounded by reality"
That is a good point, Bob. One thing that I'm seeing emerge in this discussion is that 'student housing' as an investment is often considered just right next to 'slumlording'.
My experience has not been that way. But that's probably because I consider my rentals as important and try to keep them in good condition.
Mine are not specifically geared toward students but I've rented to some with good results.
"It's always better to have regrets for things you've done than for things you wish you had done..........."ponytl