Market selection is a crucial factor to consider when investing in student housing assets. The right market can significantly impact the success and profitability of an investment. Here are some reasons why market selection is important in this context:
1. Demand and Population
Private REITs often invest in properties that are not available to the general public or are not traded on public stock Choosing a market with a strong demand for student housing is essential. We consider factors such as the prominence of universities or colleges in the area, student enrollment numbers, and the overall student population.
A university with a stable or growing enrollment indicates sustained demand for student housing, reducing the risk of vacancies and ensuring a consistent flow of rental income.
At Versity, we know that the most resilient markets tend to be 4-year public universities that are Tier 1, Power 5 Athletic Conference schools with enrollment exceeding 20,000 undergraduate students.
2. Location and Proximity
The location of the student housing property in relation to the educational institutions is crucial. Students prefer convenient access to their campuses, amenities, and transportation options. Properties in close proximity to universities or colleges tend to attract higher demand and command premium rents. At Versity, our research shows that proximity to campus makes a big difference in students’ housing selection, so we generally seek out properties that are within three miles from campus.
3. Rental Market Dynamics
Analyzing the local rental market is vital for understanding pricing trends and competition. At Versity, we research rental rates for similar properties in the area to determine if there is potential for rental growth.
Additionally, we consider the lease-up periods and occupancy rates in the market to gauge the ease of finding tenants.
4. Regulatory Environment
At Crew, we familiarize ourselves with local regulations and policies related to student housing. Some areas may have specific rules on zoning, occupancy limits, or licensing requirements for student-focused properties. We gain understanding of these regulations to ensure compliance and avoid any legal issues that could impact our investment.
5. Economic Factors
At Crew, we evaluate the economic stability and growth potential of the market. A strong local economy with diverse industries and job opportunities can contribute to a steady demand for student housing.
We consider factors such as unemployment rates, population growth, and the presence of industries that attract students or recent graduates. We also consider the strength of the primary economic anchor – the university.
6. Supply and Competition
At Crew, we assess the existing supply of student housing in the market. An oversupply of housing options could lead to increased competition and potential downward pressure on rental prices. On the other hand, a market with limited supply and high demand can create opportunities for higher rents and lower vacancy rates.
7. Long-Term Investment Potential
At Crew, we look beyond the current conditions and consider the long-term prospects of the market. Is the market likely to experience sustained growth in the student population? Are there any major developments or infrastructure projects planned that could impact the demand for student housing positively or negatively? Assessing the long-term investment potential helps us make informed decisions.
In summary, market selection plays a crucial role in the success of student housing investments. It involves analyzing factors such as demand, location, rental market dynamics, regulations, economic stability, supply and competition, and long-term prospects.
Crew’s thorough research and due diligence process helps in identifying markets with strong investment potential and maximize the returns on student housing assets.
