How to Invest in Housing Market: Your Path to Profitable Student Housing (6 Strategies)

Investing in student housing can earn you a consistent income stream. It’s an exciting sector to be involved in, yet many are hesitant to take the plunge. With expert knowledge, insights, and tips, you can start investing confidently.

Do you need guidance on how to invest in the housing market as a beginner? Here are six ways to start investing in student housing.

What Is Real Estate Investing?

Real estate is defined as a piece of land and any structure permanently attached to it. Therefore, when you invest in property like student housing, you’re investing in real estate.

There are several categories of property in the real estate market: industrial, commercial, residential, etc.

Sometimes, a type of real estate falls into two categories, such as student housing. While student accommodation offers students a place to live (residential), this type of property is also used to earn income from student rental payments (commercial).

As with other categories of real estate, you can invest in student housing both directly and indirectly.

Understanding Direct vs. Indirect Real Estate Investing

Investing in the housing market can be quite profitable. But first, you must decide if you want to invest directly or indirectly. This can affect how you invest and how much you’ll need to spend. So, what is the difference between a direct and indirect real estate investment?

Direct Real Estate Investing

In direct investing, you buy physical property. This practice involves purchasing properties, possibly renovating and refurbishing them, and selling them for a profit or renting them out to earn a rental income.

You may purchase the property yourself if you have the funds or qualify for a big enough loan. You could also pool funds with others in a real estate investment group (REIG) for a direct stake in building, developing, or purchasing property.

Direct investment is typically more expensive than indirect investment.

Indirect Real Estate Investing

In indirect investing, you don’t buy a property yourself. Therefore, indirect investment is typically more affordable than direct investment. This method involves purchasing shares that are related to real estate. Examples include exchange-traded funds (ETFs), mutual funds, and real estate investment trusts (REITs).

Contributing to real estate crowdfunding gives you an indirect stake in a property and is also a form of indirect investing. We’ll touch on this point again later.

6 Ways to Start Investing in Student Housing

Once you have decided how to invest in the housing market, directly or indirectly, you’ll find there are several ways to start investing.

1. Turn a Property You Already Own Into a Student Rental Property

You don’t have to look too far for a student housing investment property when you already own property.

Maybe you own a residential property or even a commercial property that you are not using. Perhaps you inherited property.

Whatever the case, you own property that you can use to earn an income through student rentals. Bear in mind that some commercial properties may require refurbishment before you can use them as student rental properties.

2. Try House Flipping

One of the simplest housing market investment strategies is to buy a house cheaply and sell it again for a profit. This is known as house flipping.

You could buy directly from the owner, through a real estate agent, or on one of the many online real estate platforms. Then you renovate it and sell it for a profit.

There are two ways you can use this strategy in the student housing sector.

• Buy a house (or even a small apartment building or even an abandoned boutique hotel) in need of some renovation. Do the necessary repairs and renovations, redesign where necessary to convert it into student accommodation, and sell it.
• Buy student property that has fallen into disuse because it is outdated or needs repairs and renovation. Do the work and sell it again.

3. Repurpose a Property Purchased at Auction

Federal agencies sell real estate and sometimes even federal lands on auction. These are usually properties obtained through foreclosure and forfeiture.

Although there is no guarantee that you’ll find the type of property you want or at the price you can afford, it’s worth looking into. You could repurpose an existing property to accommodate students.

You could sell the property or rent it out to students yourself.

4. Invest in a Real Estate Investment Group (REIG)

A real estate investment group (REIG) is a company that pools funds from investors to raise the capital to buy or build real estate.

This offers investors direct ownership stakes in specific properties and some control over the REIGs' investment decisions.

The initial cost may be higher than some other investment types, but depending on the REIG structure, the profits could make it worthwhile.

5. Buy shares in a Real Estate Investment Trust (REIT)

A real estate investment trust (REIT) is a company that owns, operates, or funds income-producing real estate. Investors buy shares in these REITs to add real estate to their investment portfolio without buying property themselves.

REITs cover various types of commercial real estate, including student housing. Many REITs are registered with the Securities and Exchange Commission (SEC). These are often publicly traded on a stock exchange, but some, known as non-traded REITs, are not.

By investing in a student housing REIT, you can diversify your investment portfolio and earn a consistent income through regular dividend payouts.

6. Invest Through an Online Real Estate Platform

Still uncertain about how to invest in the housing market? Crowdfunding involves pooling money from a group of investors to fund a project. It is done through an online platform.

Some of these crowdfunding platforms focus exclusively on real estate construction/development projects that will be rented out to students.

If you choose to invest in student housing through an online real estate crowdfunding platform, you’ll receive returns through rental income or property appreciation.

Finding the Best Places to Invest in Student Housing

Once you know how to invest in the housing market, you’ll want to know where to do it.

University Towns

When looking for a property to use as student accommodation, check traditional university towns first. They naturally have a higher demand for student housing, as many students prefer to live near campus. Our guide to the universities with the highest enrollment rates will help you to capitalize on student housing needs.

Urban Centers

Urban centers are also ideal locations for investment in the housing market, as urban centers often contain thriving colleges.

Students on these urban campuses need suitable accommodation too. It’s a bonus if your property is located near public transport hubs, as this offers students extra convenience.

Pros and Cons of Investing in Student Housing

Investing in real estate is profitable. The student housing market is particularly resilient, and demand for student housing is growing. But even when armed with the student housing market investment strategies and tips above, things can go awry.

Let’s look at the pros and cons associated with the above student housing investment options.

The Pros

• You limit your investment costs and create a consistent income stream by renovating and renting out property you already own. Being that you decide what to charge as rent, you determine your profits.
• House flipping can be a fun project and a means to earn yourself a tidy profit. You can use that profit to invest toward another property flip or a different student housing investment strategy.
• Properties bought at auction are often more affordable than they would be if bought through a real estate agent. By saving money on the purchase price, you can focus on high-quality renovations.
• REIGs allow investors to have direct stakes in owning property without buying property outright. You won’t even have to go and view any properties. They do all of that for you.
• REITs are required by law to distribute at least 90% of their taxable profits to shareholders as dividends. Although there will be fees involved, they are more affordable than managing a student property yourself.
• Contributing to online real estate crowdfunding is user-friendly and can even be done with a very small investment amount. It requires no property viewing, bidding, buying, or renovating. Best of all, it’s perfect for beginners.

The Cons

• Renting out your property as student housing can be a good investment, but student properties have a high turnover rate. This means that, as the owner, you have to spend a fair amount of money on maintenance and upkeep, unlike some other real estate projects you could invest in.
• Before directly buying property to renovate and sell or rent out as student housing, check if there is a demand for it in the area. If you don’t have up-to-date data about student housing supply and demand, you risk being stuck with newly refurbished student property you can’t profit from.
• The profit from flipping houses and other properties to the student housing sector is not always as much as investors hope for. It’s also quite common to discover a mounting list of issues that need to be repaired. This requires time and commitment to the project.
• Dividends paid by REITs are treated as ordinary income. REITs don’t offer the reduced tax rates other types of corporate dividends may offer. Always consult your tax adviser before investing in a REIT. Non-traded REITs involve risks unsuited to novice investors.

Tips for Real Estate Investors

Wondering what research you need to do before investing in student housing? Here are our top tips:

1. Check the local supply and demand data for the area in which you intend to invest. Increased enrollment is beneficial, but the area may already have adequate housing. Look for an area with a high demand for but a low supply of student housing. Here is a guide to supply-demand dynamics.
2. If you intend to buy a property and rent it out to students, research crime statistics for the area in question. You want to choose an area that is safe for students to live in and travel through on their way to campus.
3. Before renovating a property or investing in a property in any other way, consider what today’s students are looking for. What are the trends shaping the student housing market? Choose the trends that are likely to last and incorporate them into your renovation plans.
4. Managing multiple student properties can be challenging. It’s a lot easier to leave the maintenance, upkeep, repairs, and even the rent collection to a property manager. If you’re determined to manage your student properties yourself, our student housing property management tips will help.

Conclusion

We’ve provided you with some great ideas on how to invest in the housing market. But even with the best ideas, you will need solid student rental market data to make the most profitable student housing investment decisions.

It’s time for you to get more data-driven information. Don’t worry, we have you covered. College House takes the uncertainty out of housing market investment with up-to-date data, analytics, and reports. Book your demo today.