Student Housing

Overview

Purpose-built off-campus housing serving large universities, leased by the bed rather than by the unit, almost always with parental guarantees attached. DSTs in this space generally focus on Power 5 or large flagship state schools where enrollment is stable or growing.

Analyst Notes

Stick to deals at major flagship universities with stable or growing enrollment. Distance to campus is a primary driver. A property within walking distance of campus is a different asset than one a fifteen-minute drive away. Ask for lease-up history from prior years and pre-leasing velocity for the upcoming year, because those numbers tell you how the property is competing in real time. Be cautious of mid-major or smaller schools where enrollment is at risk.

Advantages

• Demand is inelastic at major universities. Enrollment doesn't drop in recessions, and at most flagship schools it grows steadily over time.

• Per-bed leasing and amenities-rich product allow for premium pricing relative to conventional multifamily in the same markets.

• Parental guarantees on leases dramatically reduce credit risk compared to typical residential rentals.

Disadvantages

• The leasing cycle is highly seasonal. If you miss the August lease-up window, you carry the vacancy for an entire year.

• Wear and tear is significant. Eighteen to twenty-two year-olds are not gentle tenants, and turn costs are higher than standard apartments.

• Enrollment risk varies sharply by school. Smaller universities and regional schools have seen real enrollment declines, and a deal at a struggling school is hard to recover.

Frequently Asked Questions (FAQ)

Property Type Performance Averages