Student accommodation, a profitable venture?

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How much would a university student be willing to pay for a room? Well, for the parents for a first year student, they would be willing to pay a lot to have their children staying within a place managed by the university. It’s safer too. For these students, once they know the area well, they would move out and find BETTER accommodations, true? I would, for the freedom, flexibility and even choices. Secondly, not many would prefer the university to determine their house-mates for them. Different rooms, sure but during football nights, would you want to fight to watch different matches? Fortunately, there’s internet nowadays. The demand for these student accommodation has made a property investment based on these needs to be viable. What are some of the considerations of going into one?

Hassle-free way – One can always start with those with Guaranteed Rental Schemes. This is because these units are normally already tied to the university / college. It’s hassle free for a few years and most of the time, the renewal is possible but one must not expect the same rental prices forever. Capital appreciation is normally nil or low in the first few years for these guaranteed rental units.

More Effort, More Control – If one is looking to build this up, it may be better to scout for undervalued properties nearby to rent out to these students instead. Yes, the rental may only be on a yearly basis but this is worth it because due to the undervalued property price, we can also have better capital appreciation too. I would prefer high-rise but there are those who are more adventurous and prefers to get a landed and sub-divide the rooms further. I do not prefer this but go to SS14 / SS15 and you get an idea how people are doing this.

Distance Choices – Note that it does NOT need to be within walking distance even as long as there are ample car parks. Think objectively, are majority of the private university students nowadays WALKING to class or driving? Second question, are your targets those who drive or walk? Haha.

Maintenance issues – Undervalued is one thing. Bad maintenance is another altogether. No students would want to stay in a place where they feel uncomfortable or unsafe. Visit the actual place and understand the maintenance before continuing. Inspecting tips here: 12 tips on inspecting condos

The right university helps – Private universities which are considered higher end tend to attract richer students and with them potential higher rental capability. As usual, this would meant that the properties that you can buy around them tend to be higher priced too. Return on investment in % tend to be similar but in actual amount basis, these more premium ones would get a higher return.

One important point to note. While we could not predict unforeseen circumstances such as the university closing its doors, it is important to also buy objectively. It would be much safer to have potential students from a few tertiary institutions instead of just one with your condo serving only that one institution.

The number of foreign students coming to Malaysia for further studies are also on an uptrend. It is foolish for some politicians to say that Malaysia attracts only the second-rate international students because majority of Malaysians studying in overseas universities are definitely not in Ivy-League ones too. Look at the positives, not focus on the negatives. Besides, these foreign students are most of the time studying in some foreign university awarded qualifications too which meant that they may be getting a UK degree but paying in Ringgit instead. I think it is safe to note that attracting the middle income families who are sending their children for a degree conducted in English is certainly a huge and attractive market and this is likely to continue too. Thus far, I have rented out to students just once. It ended on a good note but I prefer a longer term rental if possible and thus perhaps student accommodation is not my main choice.

written on 19 Oct 2015

Next suggested article: Property investment? It’s not always rosy

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