Should you invest in student accommodation?
At South African universities and colleges, a massive gap exists between the demand for accommodation on campuses and the available spaces in the official residences. With more and more students being accepted every year, this need for accommodation has grown. Students who cannot live in the official residences, need to find other accommodation, preferably close to campus. Luckily, there are a few options to choose from.
If you are considering investing in rental property, have you considered investing in student accommodation? This investment can be profitable, and with South Africa attracting more and more students from across the world there will never be a shortage of students who want to rent your property. So, why should you consider investing in student accommodation?
Many investors have chosen student accommodation because of the profits it produces. When you invest in accommodation close to higher learning institutions, you will receive a higher income per square meter and you are guaranteed to have tenants year in and year out. It is important to note that the demand for student accommodation is much higher than the actual supply, which is good news for investors as this leaves a gap in the market. Some of the most lucrative areas in South Africa for investors to consider include Stellenbosch, Grahamstown, Rondebosch, Cape Town and Bellville.
When it comes to student accommodation, perfection is not a necessity. Unlike a young family who wants to make a house a home, students are well aware of the fact that their accommodation is temporary and that they will be leaving for bigger and greater things once they have completed their studies. This being said, students do still expect decent living conditions along with affordability.
Another reason why investors should consider investing in student accommodation is that you will be able to raise the rent along with the market, allowing you to re-advertise your property at market-related prices. This means that the turnover is ultimately much higher.
So, what types of student accommodation can you choose between when looking to invest? There are several accommodation options, which include:
- Purpose-built student accommodation
Usually coming in the form of apartment buildings, this is one of the most popular choices among investors and students alike. As a landlord, you will most likely have a rental company that takes care of the management of the building, which means that this is the ideal hands-off way to invest in student accommodation. If you can find a flat or apartment located close to the campus or student area, you can be sure that it will be a good investment and you will always have tenants.
- Shared house
These are larger properties that have been converted into several separate bedrooms and common areas. This investment will allow you to maximise your profits and it will also improve the ease of maintaining the property as there are multiple tenants under one roof.
Now, before investing in student accommodation, there are several risks to look out for to ensure that you make the best decision and investment possible. It goes without saying that students have a bad reputation, especially in the property market - they are notorious for noise, property damage, and complete disregard for their neighbours - so, when looking at potential student tenants, it's important to do some homework and some serious vetting. You can include clauses for immediate termination of the lease, which could allow you to evict tenants who violate the rules or of whom you receive various complaints.
Unfortunately, student tenants come with a lot of administration, So, it's advisable to not get trapped in a long-term contract. However, this means that you could potentially have to find new tenants every year and perform credit checks, negotiations, etc. all over again. Luckily, in some cases, depending on their studies, students might stay at your property for longer than a year, which means that you will not have to go through all the trouble every single year.
No matter which type of student accommodation you choose to invest in, it will be an investment worth having. You will be guaranteed great returns on your investment and receive the assurance of never having to worry about finding a tenant again.
This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your specialist adviser for specific and detailed advice. Errors and omissions excepted. (E&OE)