Lydia Taylor October 11th, 2007
I have the privilege of having a guest writer on the Augusta Real Estate Blog today. Aubrey Zaffke of Trimark Properties in Gainesville Florida sent in the following article about investing in the student housing market.
Aubrey and I have been corresponding about rental housing. Trimark has been a great success in Florida and I think their strategy could certainly work in Augusta as well. I hope you enjoy the article!
The recent downturn in national housing has negatively affected many investors and homeowners. The volatility of the markets has driven a lot of these anxious investors into less volatile investment opportunities, but one of the best investment opportunities still exists within the housing market itself.
While most housing markets in today’s economy are temporarily unstable, college housing markets are still one of the better investments. Large and small investors have found that in times when housing market prices are declining, they can purchase residential homes, duplexes and condos at below market-average prices, and then rent them out to students for significantly higher than the mortgage, taxes, and insurance. As opposed to other rental markets which are typically tight in a declining market, college housing maintains their rental and occupancy rates. After making a good return over several years through rental income, the investor can then sell the property when the market again stabilizes and housing prices rise.
Take note that while most housing is affected by the job market and interest rates, college housing is always in demand. That is because a college education tends to have an inelastic demand. That means that like oil, regardless of price, there is always a demand for a college education. And if you understand the current growth strategies of many major universities and college towns, investing in college housing can be a great way to get a return on your investment.
Many colleges facing budget constraints and limited space to build new classes, research buildings, and auditoriums, are placing less emphasis on building on-campus housing to accommodate students. Most allow students to live off campus and in some cases even recommend it to older students so there are enough beds available to incoming freshmen.
Consider for a moment, Gainesville Florida, home to the University of Florida (GO GATORS!). Students attending this major university are not required to live on campus. In fact, after their freshmen year, most students live off campus in rental apartments and houses. There is very high demand for rentals, due to the limited number of on-campus housing options. According a recent article on Smart Apartments, UF has nearly 50,000 total students, but only enough dorm rooms for 7,300 students, plus 980 on-campus apartments for graduate and family housing. All combined, there is only enough on campus housing capacity for 16% of the students. The remaining 83% of the student population turns rentals near the campus. In student housing, location is a major determinant of success. The student rental market near campus is thriving and continues to grow at a rate outpacing much of the normal rental market father away from campus.
Trimark Properties owns affordable and luxury Gainesville apartments within walking distance to the University of Florida and is able to charge a rental rate in upwards of 16-30% more than comparable property farther away from campus. They also have a 100% occupancy rate, while published occupancy rates for the same time period in other parts of the same city vary between 80% and 94%. They’ve recently expanded their holdings to include several UF Housing options, including two private luxury off-campus dorms and expect to build an additional six student housing developments in Gainesville within the next 24 months. Much of this success can be attributed to the high demand for luxury living near the college campus. One of the major problems at the University of Florida and other college campuses nationwide lies within the lack of parking for students and faculty. Though UF has over 40,000 students living off campus, there are only 3,393 on campus commuter parking spots for those students. Additional parking spots are located in a parking lot called “Park N Ride” which is located so far from the section of campus where classes are located that students need to take a bus from the parking lot to get to their classes. Both options sound practical are but are very time consuming and have draw backs. For one, the bus system is far from reliable; oftentimes buses will be full and leave students waiting for the next bus. This means students may have to start their commute in the morning an hour or more before their actual classes. Two hours per day commuting (back and forth) may not sound like an insurmountable amount of time, but consider that these students often only have 2-3 hours of classes during that day. That means that a student can spend as much time commuting as they actually spend in class!
Augusta does not have a college the size of the University of Florida, but don’t overlook the possibility of making a large profit by investing in college housing in the area. There are actually four colleges in the Augusta area: Medical College of Georgia, Augusta State University, Augusta Technical College, and Paine College. Combined, they have over 13,000 students and few on-campus housing options.
Companies like Trimark Properties and individual property owners can charge top dollar for apartments and condo rentals near the college campuses, because they can provide residents with housing and parking near the University and the convenience of being able to walk to class. Essentially, colleges are quickly becoming every city’s “beach front property”, and as you get closer to the beach (as many of you who live on the coast well know), rent gets more expensive. More over, properties near colleges across the country have among the highest value regardless of the overall housing climate. Even when the single-family housing market does not appreciate, the student rental market grows as the University expands its enrollment levels without expanding on campus parking or housing.
Given the right mortgage terms and timing, buying into the college housing market can be a great way for small investors to gain a return on an investment in a challenging housing market. For those of you who are looking to invest into the housing market in the near future, consider contacting Lydia Ann Taylor with Meybohm Realtors. She can assist you in finding the perfect investment opportunity and give you information on how to turn your student housing into a rental with great returns!
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Aubrey Zaffke is the Senior Marketing Director of Trimark Properties in Gainesville. She has over eight years of experience in marketing management and strategic planning.
