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Investing in Student Housing

An In-Demand Market Segment for Multifamily Investors

Investing in student housing and multifamily student properties is a popular strategy among real estate investors because of its high revenue potential.

Why? It seems simple, but the lease can make or break investor profits. Most students sign leases prior to the beginning of the school year, which helps investors accurately calculate cash flow.

Student housing leases are usually offered in 12 or 13-month intervals – keeping the property occupied year-round. When there are vacancies, proximity to the local university helps investors secure new tenants quickly.

Multifamily student housing investing appears to be among the most recession-proof type of real estate investments, making it an appealing real estate opportunity to investors.

Think about it like this: student housing is a subset of the multifamily asset class, where employment prospects generally drive demand.

Post-COVID, most students and educators have returned to campus, helping to insulate student housing demand from macroeconomic or market-specific shocks to provide dependable cash flow and returns.

The Multifamily Market Comeback

The multifamily market has been a force to be reckoned with pre- and post-COVID.

Moody’s Analytics CRE reported that rent growth remained strong in Q3 2022 – increasing 10.6% YOY – despite a slight decrease from Q2 to Q3 2022.

Annual rent growth has been slowing for the past nine months, but rents are still growing faster than they were before the pandemic began in March 2020.

All in all, this continued rent growth for student housing is good news for investors seeking real estate investment opportunities in the multifamily space. Despite increased interest rates and record-high inflation, the multifamily market is still generating cash flow for investors.

The multifamily student housing investment market has been an extension of the strong multifamily real estate market.

A Growing Market

Student housing investments saw decent growth in Q3 2022.

The fall preleasing period closed in September, with 96.6% of bedrooms at Yardi 200 universities leased, according to Yardi’s National Student Housing Report.

Meanwhile, annual rent growth was 4.1% as of September. While rent growth was down from the peak 5.1% growth earlier this year, it is still exceptionally high by historical standards.

Investor interest in student housing remains strong, as market fundamentals are robust.

Yardi 200 recorded sales volume for student housing totaling nearly $2.4 billion for the first half of 2022, and Blackstone’s $12.8 billion acquisition of American Campus Communities, which was announced in April 2022, is a notable bet that the multifamily student housing sector will continue to perform well.

A Look at the Multifamily Market

The multifamily real estate investment market has remained strong, despite record-high inflation and increasing rates. With student housing performing at or even above these high standards, multifamily rentals continue to be promising investment opportunities for real estate investors.

Whether you’re looking to capitalize on the booming build to rent market or jump into traditional multifamily properties, Lima One is the nation’s premier private lender and can help you obtain the multifamily financing you need with our suite of loans for real estate investors.

Our sales, credit, and capital markets teams have decades of experience helping investors across the country obtain loans for multifamily properties.

We offer a full suite of loan products and investor financing solutions for every investment strategy — from simple bridge loans, rehab and fix & flip financing, and long-term stabilized multifamily loans to the most complex structured finance solutions.

Our clients have different investment strategies, so we have designed our loan options to allow us to cater to their individualized needs. Contact us today to discuss your next deal, or if you have a deal in hand, accelerate the process by applying now.

Where Students Are Living