The Pros & Cons of Investing in College Housing

Investing in college housing has become an even hotter trend lately but what are the real pros and cons?

Investing in college towns has long been a profitable niche for real estate investors across the nation. Typically, good schools enjoying booming local businesses and growing communities making for good fundamentals for real estate investing. Now major players including private equity and big home builders are getting in on the action with deluxe dorms.

So what are the real advantages and disadvantages and is investing in college housing for you?

The Pros of Real Estate Investing in College Housing:

  • Can be seen as a form of social good, helping to fuel education
  • Good schools can be surrounded by grounds which are ripe for growth
  • Multiple tenant housing and rooming can result in much higher rents per unit
  • You might get your kids’ college housing for free or at least save on the expense
  • You could get bought out by the college as it desires to expand and soak up more land
  • Most students aren’t very demanding tenants
  • Individual vacancies make little impact on overall returns and cash flow

The Cons of Real Estate Investing in College Housing:

  • Student loans are defaulting at an unsustainable rate which may be a concern
  • Students are exiting higher education unable to get jobs with their degrees while dropouts launch multibillion dollar businesses, creating a shift in trends and future demand
  • Property maintenance can be a nightmare; your tenants are students after all
  • Students can be extremely unreliable tenants
  • You may have to deal with parents too
  • Colleges (for example in Connecticut) can push local government to seize property by eminent domain for expansion
  • Challenges of handling property management from a distance