Many investors have thought of investing in student housing at one time or another. While it may seem very attractive due to sometimes low start-up costs and high rental yields, this niche investment also has its downsides to consider. Investing in student housing has its fair share of drawbacks that need to be carefully weighed against the potential benefits before embarking on this journey.
Higher costs
accommodation near adelaide university often requires additional security, household items, and full furnishings. On top of that, more wear and tear on student housing could mean more frequent replacement of furniture and household items and higher maintenance costs. Property management fees are also higher due to managing multiple individual tenants.
Increase turnover and vacancies
Be prepared for the constant turnover of short-term rentals and the possible vacancy of the property at the end of the holiday period when many international students return home. Some tenants may continue to rent during this period, but tenant conflicts within the same property and homesickness are common issues that will lead to higher tenant turnover regardless.
Additional hassle
Multiple tenants on the same property mean multiple leases, which is quite a hassle. Also, student tenants are notoriously late with rent payments, so you can expect regular promptings from every tenant. These tenants may not be as well catered for as a young couple or family, so maintenance and cleaning will be more of an issue. You should also find out if a regular insurance policy will suffice, and some councils may have different requirements for properties with multiple separate tenants. You may also have difficulty getting the right loan.
Poor prospects for capital growth and resale
The worst drawback is the high probability of minimal capital growth. Student housing, in most cases, represents short-term cash flow through long-term growth. It determines its resale value by reducing competition and buyer demand. It is a niche market that appeals to a small group of people. So when it comes time to sell, it can be challenging for you. By excluding owner-renters from your pool of potential buyers, you limit your market to about 70%, but that number increases more when you cut out all the regular investors who won’t touch student housing.
Summary
Some people debate whether buying a student residence is a good investment. While it has some benefits and may work well for some investors, this niche investment is risky and often doesn’t pay off in the long run, especially for those investing in purpose-built residence halls.
