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Student Accommodation Investment In America- What Are The Options?
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In many major real estate markets, including the UK, student accommodation was considered very much a "fringe" investment for many years. The mention of student accommodation would bring up images of crumbling town homes, with wallpaper hanging off the walls and packed to the roof with students.
Over the past couple of years though, this image has begun to change. Many investors have realized that student accommodation can offer benefits including a captive rental market, low rent default and tenants that tend to leave properties on time.
With many Western countries seeing a growing number of students, in particular international students, there has been increasing demand for better quality accommodation. Developers have stepped in to fill the void by the providing purpose built student accommodation. These are typically very similar to apartment buildings and comprise of self-contained studios with common areas for socializing.
Many developments offer guaranteed returns, usually in the region of 7% plus per year making it an attractive and more secure option for investors. However, the entry prices for well-located, good quality studios are not cheap. Expect to pay in the region of $75,000 plus for a studio. And it is likely to be off-plan so it could be some time before you see a return on your investment.
A large number of student accommodation investment offers are situated in the UK but this is not the only country to offer. Here at P4P we have sourced an already built and already performing development located just outside Limestone College in Gaffney.
Entry prices start from only $48,670 for a self contained unit that is rented at $550 per month. The rent increases to $760 per month for a two-bed apartment.
Like a lot of student accommodation offers, there is a guaranteed return. Unlike a lot of rental guarantee options though, this one is asset backed and the rental agency provides the owner with a performance warranty certificate.
The rental agency is able to offer this as Limestone College have taken out a 5 year contract on all units. Investors therefore get a rental guarantee until 2020! And it's worth bearing in mind this rental guarantee is for a minimum of 8%. It's likely these units will earn more, especially when extras like proceeds from laundry, vending machine sales are factored in and these will be disbursed to the owners too.
Exit strategies are important to consider in the context of investing in student accommodation. It's unlikely you will be holding the property forever, so who will you sell to when that time comes? Many student accommodation offers are purpose built and therefore it is likely you would have to sell onto another investor. This should not be a problem if your student accommodation investment is well located but it does mean you are selling to a more niche market.
With our US student accommodation offer in South Carolina, the units are well situated in the town of Gaffney and have the potential to be privately. Unlike many student accommodation investment offers, there is no obligation to rent solely to studios, which widens the rental and resale market.
To find out more about student accommodation investment in the US please do not hesitate to contact Property4peanuts
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