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Is There an Oversupply of Student Housing in North America?

Is There an Oversupply of Student Housing in North America?
With each passing academic calendar year, more and more student housing is being made available for colleges and universities across North America. There has been a great deal of speculation within the multifamily housing industry on whether or not there is an oversupply of student housing hitting the market. Some industry insiders have proclaimed that the student housing market is becoming oversaturated, especially within the United States. Others believe this is a myth. Let’s examine some facts. Beginning in the late 2000’s, REIT’s and private-equity firms began adding a great deal of purpose-built student housing to their portfolios, as they saw great investment potential. The Wall Street Journal claimed that some developers overestimated future enrollment rates and didn’t consider other student housing developments, which led to an oversupply in some markets. This is perhaps what sparked the discussion about national oversupply in student housing. However, this oversupply was only occurring in a select few markets within the United States. It’s imprecise to attribute a national trend of oversupply, based on only a handful of markets. While it may hold true that certain popular college towns are in a state of oversupply, there isn’t enough quantitative data to demonstrate oversupply on a national basis. AxioMetrics estimated that in 2014, a total of 60,000+ beds, both on and off-campus, would be delivered nation-wide for the fall. This has created concern. However, it should be noted that while student housing deliveries are increasing, they are being spread across more universities and states than in the past (s......
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Managing Student Housing Properties

Managing Student Housing Properties
There are some properties that just lend themselves to student housing. They are located close to a college, university, or vocational institution; offer a number of student-required amenities such as are filled with other students; and offer student-friendly rents. Apartment complexes or multifamily properties are more likely to become “known” as student-friendly, but it’s just as likely for single family rental homes to do the same. Regardless of the type of rental property you own or are considering for an investment, there are some pros and cons you need to consider: Pro: Demand is something many student designated properties hardly ever, if ever, have to worry about. With every semester comes a new wave of students in need of off-campus housing. As long the educational institution is near-by, the demand remains. Con: Turnover is the flipside of the demand coin. While students likely always be lined up to fill vacancies, high turnover is intrinsic to this market. It’s not only a pretty good bet that most tenants will only stay 9-12 months, and at most 2 or 3 years, there is also a higher rate of incidence with this group of skipping out early on a lease. Pro: Economics are another significant factor on the side of investors. Even with a steady decline in enrollment since 2009, there are still more than 19 million students attending colleges and universities nationwide.  And, the National Center for Education Statistics forecasts enrollment growth to increase to 24 million by 2022. Combine this knowledge with a rece......
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Student Housing Report Oct. 2014: New Supply Absorbing

At the start of 2014, many analysts were expressing deep concern about the number of new student housing developments scheduled for delivery in time for the Fall 2014 semester. With the new academic year well under way, it seems safe to say their fears about potential oversupply were wrong.   About 65,000 new beds were delivered to the privately owned, purpose-built student housing sector this fall - approximately 6,700 more than last year - and the overall performance has proven stronger than it was one year ago.  Occupancy in already existing off-campus properties averaged 95.8% in September 2014 on a same-store basis, some 190 basis points (bps) higher than the 93.9% recorded in September 2013.   At times, media have reported that properties were struggling to fill beds, with too much supply being the supposed culprit. As seen in the chart below, those low occupancy rates are outliers, as most properties achieved an occupancy rate greater than 90% by September 2014, even those more than one mile from campus. Similar outliers can be found in other real estate sectors, and there is often an underlying reason for the performance that has little to do with supply.     Anyone following prelease occupancy rates throughout the leasing season saw the hints of stronger performance for Fall 2014. It was obvious in November and December last year that beds were being leased at a faster clip than the previous year. While the spread in outperformance narrowed during the spring months, properties made a......
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Why Student Housing Landlords Should Care About Roommate Conflict

Why Student Housing Landlords Should Care About Roommate Conflict
It’s only the second week in September and you’ve already received several complaints from tenants detailing how they can’t stand their roommates! Like many landlords, you believe that it isn’t your responsibility to mediate roommate conflicts. After all, you’re a landlord, not a conflict resolution specialist. You tell the tenants that it’s their responsibility to work out any differences and come to a mutual understanding. What else can you say? It’s not like you’re going to evict a tenant for not being a good roommate.  Should landlords care about roommate conflict? Roommate conflict scenarios are an unfortunate reality when dealing with student housing. It’s common for landlords to rent by-the-room, which often involves having tenants live together who know nothing about one another at first. If a landlord is lucky, a group of friends will rent out the vacant unit or rooms, but it’s not always practical to expect this perfect group of students will apply for housing together.   When roommate problems occur, what should landlords do?  Regardless of the market a landlord owns rentals in, one thing always remains consistent – the goal to keep profit margins high and vacancies low. A great way of achieving these two goals is by maintaining a high lease renewal rate. To accomplish this, it’s important to ensure that current tenants are happy and enjoy their accommodations. If a tenant experiences roommate conflict, the odds of him or her renewing the lease is considerably low. This probability of renewal is even less, if the landlord doesn’t at......
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Potential Reasons Why Landlords May Not Be Getting Rental Inquiries From Students

Potential Reasons Why Landlords May Not Be Getting Rental Inquiries From Students
First thing’s first, don’t panic! Often the reasons for a lack of rental inquiries are easily diagnosed and can be remedied without much difficulty. This blog post will highlight some of the key reasons why a rental advertisement may not be performing well and how it can be tweaked, with the specific goal to increase call volumes and tenant inquiries.   Before placing a rental advertisement, the first step every landlord and property manager should take is to do some basic research into the rental market. It’s important to understand what the competition is offering. To accomplish this, simply look at other properties advertised online and compare them to your rental. The important things to review are what the average rental rate is, what utilities and amenities are included, the standard lease term, what information is detailed in the description, type of pictures showcased, and so forth. Often the biggest deterrent and reason why potential tenants don’t respond to a listing is that the rental rate is too high. In the student housing market, pricing a rental unit competitively is incredibly important, as students are often on a relatively tight budget. If other property owners are renting out rooms between $500 to $600/month, it’s important to try and stay within this range as well. On occasion, exceeding this average range is acceptable, but the property must have great selling points that justify the higher price. Pricing may vary greatly in different rental markets, but that is not generally the norm.   Another ......
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Should Landlords Rent By The Room Or By The Unit?

Should Landlords Rent By The Room Or By The Unit?
Every student housing market is a little different but one thing remains consistent - all rental property owners wish to maximize profits and keep vacancies low.   In order to accomplish this, some property owners have adopted the idea of renting by-the-room, instead of by-the-unit, especially in competitive rental markets. There are both benefits and drawbacks of both to consider.In student housing, a landlord will often rent a property to multiple unrelated individuals. When the only option for students is to rent an entire unit, they must group together ahead of time. Many students don’t have groups of friends or know other students who are searching for housing as well, especially if they are first-year students.  As a result, they often prefer to rent a place individually. If these students cannot afford an entire unit on their own, then their rental options can be limited. This is why many students prefer to rent by-the-room.  In addition, it saves them time and the situation of trying to find a reliable group of peers to share a unit with.Renting by-the-room also absolves students of the concern and potential expense of a roommate not paying rent or causing damage to the unit. When renting by-the-unit, the lease typically requires all roommates to be responsible for the rent and condition of the unit. This is generally known as the Joint and Several Liability clause, where in the event one roommate stops paying rent, the others will have to cover the amount.   A factor to c......
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The Amenities Race In Student Housing

The Amenities Race In Student Housing
The growing popularity of purpose-built student housing has created what some call an amenities race, as student housing operators compete to lure in student renters.   With no end in sight, this amenities race is one where each new purpose-built student housing center attempts to trump its competition by offering anything from lavish recreational facilities to tanning beds. But are these unique offerings and non-traditional amenities what student renters really want? Some would argue no.   While a heated indoor pool and decked-out recreational room for residents may sound nice, students are often more concerned about the rental rate and distance to campus. In 2012, J Turner Research surveyed over 11,000 students and discovered that the top two most important factors for students when selecting an apartment were rental rate (47%) and location – specifically proximity to campus (22%). Surprisingly only 2% of respondents indicated that community features and amenities were most important when selecting an apartment. The survey also asked parents the same questions and only 1% of parents indicated that community features and amenities were the most important factor. The top two priorities for parents were security (34%) and location – again proximity to campus (29%).   It’s also interesting to note that in this survey, both students and parents were asked what service or utility upgrade they were willing to pay more for.  It was surprising to see that the top ranking responses was none (no service/utility upgrade), with parents clocking in at 42% and students at 26%.   To a......
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The Importance of Rental Market Research in Student Housing

The Importance of Rental Market Research in Student Housing
A wise investor knows that market research is absolutely crucial before investing both time and money into a project. Investment in student housing can be a very profitable venture, but it’s important to have a solid understanding of the market first. Information can be a very valuable asset to property owners; but exactly what information should be researched for the student housing market?The most vital piece of information property owners need to know in any rental market is how competitive it is – what’s the availability of rentals in that area?   There are two general types of markets; renters and tenants. A renter’s market is one that favors property owners, as there tends to be limited availability of rentals, which can drive rental prices up. A tenant’s market is one that favors tenants, where there are many rental options and it isn’t overly competitive for tenants.   Discovering what type of market exists in an area is fairly simple – just take a look at what is available and talk to tenants. Tenants will be your best source for this kind of information, as they will have firsthand experience on what the market is like. By asking prospective tenants some simple questions such as, “How difficult is it to find a good rental?” a prospective owner can discover invaluable information.   Determining the going rental rate would be the next piece of vital information. Pricing a rental rate too high can cause a lack of interest in the property, resulting in fewer inquiries. Meanwhile, pricing a rental rate too l......
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Do Short Leases Attract Student Renters?

Do Short Leases Attract Student Renters?
  Many students who are searching for housing face the challenge of finding a lease that matches the length of their academic year. In most college and university cities, it’s fairly common for landlords and property managers to offer a twelve month lease; however, many students are only in school for eight to nine months. With the majority of these students returning home for the summer, they are left paying for three to four months of rent, when they aren’t occupying the accommodations. This leads to the question - do short leases attract students?  YES! There are three primary reasons why students are attracted to shorter leases:  Students have a limited income and typically cannot afford to lose money on rent. Students often don’t have the need for housing over summer, as most students return home. Shorter leases eliminate the need to sublease.   What does this mean for landlords and property managers of student housing?Some landlords and property managers may have success offering a twelve month lease, particularly if it is considered standard within their rental market. However, in some college and university cities that have a highly competitive rental market, it would be beneficial to offer a more flexible lease term, as eight to nine month leases would be more appealing to student renters.   What about the lost income for landlords and property managers? Often they will prorate the rental rate slightly and/or secure short-term leases during the summer months. Many cities have seasonal visitors such as tourists, sports teams......
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Student Housing Preferences - What Do Students Really Want?

Student Housing Preferences - What Do Students Really Want?
Have you ever wondered what amenities and features students are most interested in for their housing accommodations? We have compiled some valuable information for landlords and property managers of student housing, to answer this question.J. Turner research surveyed 7,095 students across the United States regarding their housing preferences and produced an insightful report titled, What Millennials Want – Residential Preferences in Student Housing Design and Amenities. We’ve compiled some key statistics and findings from this report, to shine a light on what student renters are most interested in.   Key Findings: 69% of students reported it's more expensive to live on-campus at their school, than it is to live off-campus. If everything was equal between on and off-campus housing expenses, respondents indicated they would be willing to pay an average of $85.01 more per month to live off-campus.   Most Important Amenities: Students were asked to rank the most important amenities with their housing accommodations. In-unit washer & dryer = 79% Each roommate has their own bathroom = 68% Extended cable / Wi-Fi included = 54% Parking included = 42% Big refrigerator = 27%   Distance to Campus: Students were asked how far they would be willing to live from campus and their ideal means of transportation. More than half of students surveyed indicated they would rather live close to campus. - 15% = a few blocks from campus - 16% = no more than one mile from campus - 16% = no more than two miles from campus - 14% = no ......
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