Why invest in student accommodation?

Is student accommodation really a good investment?

By HouseFurb, Nov 26, 2018

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Investing in student accommodation has it's pros and cons, but is generally is one of the best property investments one could look at

With the ever-increasing demand and shortage of supply for student accommodation nationally, properties closer to Universities and FET Colleges are gaining value by the second.

South Africa has over 2.3million students registered across 149 private and public higher learning institutions. The Department of Education has identified a shortfall of 250 000 beds for Universities, and when including other technical and vocational higher institutions, the shortfall jumps to 750 000 beds. Universities who normally have the capacity to supply on-campus accommodation only cover for up for 20% of their total registered students per year. These institutions then depend on privately owned student accommodations to get commune licenses for their properties, then apply for University Accreditation and run them as student accommodations to help with the demand.
The University of Johannesburg (UJ) has by far showed the biggest demand for student accommodation in Johannesburg area as compared to other Higher Learning Institutions. Let's look at the below figures

UJ has over 50000 students registered per year across 4 campuses, with 27000 beds (in campus and privately owned off-campus accredited accommodation). This leaves the University with around 13000 students that are left to find a cash-only accommodation. It is a big challenge for students as most of them are funded by NSFAS and bursaries who requires accommodations to be University accredited for them to pay rent for a student.
To make the most of a student accommodation investment, it is best to buy a property that is already University accredited so that organizations like the National Student Financial Aid Scheme (NSFAS) can be able to pay a guaranteed rental amount per month for a student's rent. Alternatively to this, property investors can buy a property, convert it into a student accommodation then apply for accreditation. It is very critical that you check UJ's accreditation policy before working on a property to make it a student accommodation. You can download a summary of the accreditation policy here
Common challenges with student accommodation would be students who always break things, that is why it's good to have a company that deals specifically with students to manage your property.
Investors need to take note that lease agreements are normally for a period of 10 months, however students do require that the accommodation keep their belongings while they are on holiday. In such a case, students can be charged a storage fee that can help investors pay for their bonds for the December to January 2 month period that the property is vacant for.

If you are an investor who's always looking for great student accommodation investment deals, submit your information here and we will source you one of our great investment opportunities

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