Buying a student property as an investment can be a wise move, but would-be investors should do their homework carefully before diving in.
From an investment perspective, Goslett says that units within a secure complex generally show a healthy return on investment over the long term. He also notes that buying a property that appeals to a broader spectrum of buyers, such as young singles and couples and not just students will not restrict the property in terms of capital growth.
As long as there are universities, there will be a need for student accommodation, says Adrian Goslett, CEO of RE/MAX of Southern Africa. He says that privately owned off-campus student housing is always in demand, so investors looking for a rental property with a constant influx of tenants will find them near institutions for higher learning.
Sectional-title units that are located in secure complexes within close proximity to a university campus as well as other amenities are particularly sought-after among students across the country, Goslett says.
“For many South African students and their parents, the idea of living within walking distance of their university and having the safety aspect of staying in a secure complex is appealing.”
In many cases universities will list off-campus accommodation on free property listings that are handed out to their students who cannot be accommodated on the premises. “Some tertiary institutions can have 40-page waiting lists of students needing housing, and as such, there is always a strong demand for rental units within the area.”
From an investment perspective, Goslett says that units within a secure complex generally show a healthy return on investment over the long term. He also notes that buying a property that appeals to a broader spectrum of buyers, such as young singles and couples and not just students will not restrict the property in terms of capital growth. Investing in property with restricted usage that only appeals to one demographic can eliminate many potential buyers at a later stage, should the investor decide to sell.
Goslett advises property investors who want to purchase student accommodation to consider the following:
1. Research properties for sale within walking distance from the university and obtain comparable prices for similar properties in the region from an estate agent specialising in that area. Consider elements such as security, parking and access to public transport services.
2. Consult with university housing officials and find out the current rental rates for students. Determine possible profit or loss by taking the rental amount and deducting expenses such as the bond repayment, rates and taxes, insurance, general maintenance costs, repairs and any other expenses.
3. Ask an attorney or real estate professional to review all contracts and agreements, also consult a tax advisor about the tax consequences of investing in student accommodation.
4. In many cases buying property can be much easier than managing the property and tenants. Determine who will manage the property and consider appointing a professional rental management agent, which can be considered a cost-effective and efficient solution to managing a rental property.
5. Apply the same risk management principles that apply to other rental properties. Set ground rules and have an agreement with regard to what is acceptable tenant behaviour, sign a legally valid lease agreement, secure a deposit and agree on breakage costs.
6. Inspect the property on a regular basis at a time that suits the tenant. Establish and maintain an emergency fund to cover any unexpected repairs and expenses on the property.
7. Advertise the property from September onwards as this is the time of year parents normally start looking for student accommodation.
Goslett says as with any property purchase decision, it is important for investors to do their research. “Buying the right kind of property and having a management strategy in place can make purchasing a student housing property a viable income-generating investment.”
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