Student Housing Shortage Creates Opportunity for Real Estate Investors

Written by Posted On Sunday, 02 July 2006 17:00

There is a housing shortage that is helping pad savvy real estate investors' pockets. If you have college-age children you may be well aware that housing for students is in great demand.

Michael Zaransky, author of "Profit by Investing in Student Housing," says that more than 80 million people will turn 18 over the next decade, which is part of the reason for the school-housing demand. Also adding to the need for more housing is the fact that more young people are going to college. And the final factor, "Public universities are under severe financial constraints so as a result they don't have the ability to build more dorm rooms and because of that they're relying on the private sector to house students," says Zaransky.

His book details how to break into this lucrative market that has often been overlooked by investors. Zaransky shared five tips with me on how to get started, what to look for in housing, and what to avoid.

Invest in university-owned low bed-to-student ratio areas.

This is a critical factor for obvious reasons -- students need a place to live while attending college. According to Zaransky, on average, nationwide, school-owned housing capacity is only about 30 percent of the total enrolled student population. That leaves approximately 70 percent of students needing to find alternative housing.

You can start with just $20,000.

Zaransky recommends starting out with a condominium in the $150,000 to $200,000 range and renting it out to students. "What is unique about the student housing investments versus some traditional ones is that rents are relatively high closer to campus and occupancies are frequently 100 percent with no vacancy. So that, as a result from a cash flow standpoint, very often the cash flow yields positively, even after debt services at today's interest rates, from day one," he says.

Look in High-growth states.

High-growth states drive demand for student housing. It makes sense that large population states will likely see greater growth in enrollment, which translates to a need for student housing. States such as California, Florida, Texas, and Arizona have the greatest enrollment in colleges and demand for student housing. "California leads the country in terms of its ranking of the number of people who are expected to turn 18 over the next 10 years," says Zaransky.

Opt for public over private universities.

Private universities tend to apply restrictive requirements on housing and sometimes even require students to live in dorms for their entire schooling. Zaransky also says enrollment at private facilities is typically capped or severely limited.

Don't be afraid of the Animal House scene.

A concern that quickly comes to mind whenever you think about renting to students is what condition the property will be in after they move out. It's a valid concern, especially if you watched the movie Animal House. However, Zaransky says a lot has changed over the years.

"Today's student housing is a product that has modern amenities, it's very well kept and if professionally managed correctly and monitored correctly a student-housing investment can stay in good condition, can be rented to responsible student occupants, and continue to give a good return to investors," says Zaransky.

He writes in his book that you do have to have a stomach for things that you might not see when you go view traditional investment properties. Zaransky says keep in mind these are college kids so you're likely to see beer cans, empty pizza cartons and laundry strewn about. But that doesn't mean your place will be torn apart if you rent to college kids. Zaransky claims kids these days will likely keep up the place a little better. "That's the norm today not the old beat-up party house."

As with any investment, be sure to do your research and take your time to determine if the property will serve your needs and ultimately provide you with a profit.

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Phoebe Chongchua

Phoebe Chongchua is an award-winning journalist, an author, customer service trainer/speaker, and founder of Setting the Service Standard, a customer service training and consulting program offered by Live Fit Enterprises (LFE) based in San Diego, California. She is the publisher of Live Fit Magazine, an online publication that features information on real estate/finance, physical fitness, travel, and philanthropy. Her company, LFE, specializes in media services including marketing, PR, writing, commercials, corporate videos, customer service training, and keynotes & seminars. Visit her magazine website: www.LiveFitMagazine.com.

Phoebe's articles, feature stories, and columns appear in various publications including The Coast News, Del Mar Village Voice, Rancho Santa Fe Review, and Today's Local News in San Diego, as well as numerous Internet sites. She holds a California real estate license. Phoebe worked for KGTV/10News in San Diego as a Newscaster, Reporter and Community Affairs Specialist for more than a decade. Phoebe's writing is also featured in Donald Trump's book: The Best Real Estate Advice I Ever Received and The Complete Idiot’s Guide to Buying Foreclosures. She is the author of If the Trash Stinks, TAKE IT OUT! 14 Worriless Principles for Your Success.

Contact Phoebe at (858) 259-3646 or phoebe@livefitmagazine.com. Visit PhoebeChongchua.com for more information.

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