Practical Considerations for Investing in Student Housing
Investing in student housing offers a niche opportunity for stable returns, supported by the consistent demand generated by university and college students. Even during economic downturns, the need for student accommodation remains strong, especially near key universities and colleges, so this type of real estate remains relatively recession-resistant. Targeting properties near reputable educational institutions improves the potential of these investments; quality institutions maintain a consistent draw of students, and attract better tenants willing to pay premium rents. As with any investment, careful planning and thorough research are key to success. A well-crafted strategy can turn student housing into a reliable and profitable asset in your real estate portfolio. However, before diving in, there are several crucial factors that every investor should consider to ensure the best possible outcome.Location: Proximity to Educational InstitutionsLocation is perhaps the most critical factor in student housing investments. Properties located within walking distance or a short commute from universities and colleges tend to have higher demand. Good walkability, bicycle friendliness, and convenient transit are critical. Students prioritize convenience, often choosing housing that is near their campus to save on time and transportation costs. Apartments with easy access or close proximity to campus typically see lower vacancy rates, and investors can charge premium rents due to the desirable location. Market Demand: Understanding Student Enrollment TrendsEvaluate the potential success of a student housing investment by assessing market demand. Look at the enrollment numbers at nearby universities and colleges. An institution with growing enrollment is likely to drive higher demand for off-campus housing. Conversely, schools with declining student populations could pose a risk for long-term occupancy and profitability. Investors should also examine broader population trends and the overall desirability of the region as a place for students to live and study. Quality of the Educational InstitutionThe reputation of the university or college plays a significant role in determining demand for student housing. Highly ranked or prestigious institutions often attract more students, many of whom are willing to pay a premium for better accommodations. The influx of international students or students from out-of-state further bolsters demand for off-campus housing. These schools tend to be more stable in terms of enrollment and financial standing. Amenities and Features: What Students WantStudent tenants seek properties with a range of amenities tailored to their lifestyle and needs. Students prioritize convenience and accessibility; offering on-site or nearby amenities can be a major draw. Investors should consider including features such as high-speed internet, laundry facilities, study areas, and recreational spaces. Security features like well-lit entrances, secure parking, and access control systems are also crucial. Rental Rates: Ensuring Competitive ReturnsResearching the average rental rates for student housing in your target area is vital to ensuring your investment can generate competitive returns. Understanding the local rental market will help you set appropriate rent levels that maximize profitability without pricing out potential tenants. Charging excessively high rents in an oversaturated market can lead to higher vacancy rates and lost revenue, while rents that are too low may fail to cover your operating costs.Lease Terms: Aligning with Academic CyclesStudent housing typically follows the academic calendar, with lease terms often aligning with semesters or the academic year. Standard 12-month leases may not always be feasible if students only want to stay for the school year, meaning investors may need to adjust lease lengths accordingly. Shorter leases can increase tenant turnover but may also lead to higher vacancies during the summer months when many students leave town. Some investors may choose to offer flexible lease terms or provide incentives to fill vacancies during off-peak times.Property Management: The Importance of Professional ManagementEffective property management is essential in maintaining high occupancy rates, addressing tenant issues, and ensuring smooth day-to-day operations. Investors must decide whether to manage the property themselves or hire a property management company, especially given the potential for higher tenant turnover in student housing. Hiring a property manager familiar with the student housing market can relieve much of the burden associated with screening tenants, maintaining the property, and handling lease agreements. Regulations and Zoning: Staying CompliantBefore investing, it’s critical to understand local regulations, zoning laws, and any restrictions regarding rental properties, especially those geared toward students. Some municipalities may have specific rules for student housing and restricting how many unrelated individuals can live in a single unit. Licensing requirements may also apply.Vacancy Rates and Economic ConditionsVacancy rates in the area provide insights into the stability of the rental market. High vacancy rates may indicate oversupply or declining demand, while low vacancy rates suggest strong demand and a competitive market. Areas with strong job markets may attract more students, leading to increased housing demand. Although student housing is often considered recession-resistant, external factors like changes in university policies, tuition costs, and overall economic conditions can still impact occupancy rates.Tenant Turnover: Planning for Increased CostsOne challenge of investing in student housing is the higher tenant turnover compared to traditional rental properties. Students tend to move frequently, often changing housing from year to year, and no longer wish to be close to their school once their education is finished. This turnover can result in increased costs related to marketing the property, tenant screening, and maintaining units between tenants.Investors must be prepared for the possibility of higher management expenses and ensure they have a reliable plan in place for filling vacancies quickly. Regularly refreshing the property between tenants and maintaining a strong reputation among students can help reduce the impact of turnover.Consulting with ExpertsInvesting in student housing can provide stable, long-term returns, but a good strategy is necessary. Consulting with financial and real estate experts can help ensure you are well-informed and well-prepared for success.
Employment Trends Behind the August 2024 Labour Force Job Increases
Despite the recent apparent good news from Canada’s Labour Force Survey for August 2024, showing an increase in a net total of 22,000 jobs, some underlying trends behind those numbers raise concerns about the Canadian labour market. Job creation has stalled and unemployment figures continue to rise, as immediate and more long-term economic pressures suggest Canada’s labour market could face considerable challenges as it moves through the latter part of 2024 and into 2025.Stalling Job Creation and Rising UnemploymentAlthough there was a net increase of 22,000 jobs, full-time employment dropped by 44,000 – the largest single-month decline in the last two years – while part-time employment increased by 66,000. According to a September Edge Realty Report, this marks a notable shift in the job market, where for the first time since the pandemic, the annual growth rate of part-time jobs exceeded full-time employment, with 184,000 part-time jobs added compared to 132,000 full-time positions.The recent shift from full-time to part-time employment has hidden the concerning drop in full-time positions, as employers demonstrated a hesitancy to commit to long-term full-time hires, looking instead for part-time workers to maintain flexibility in their staffing. This results in a loss of greater job security, better benefits, and higher wages generally associated with full-time employment. The switch to part-time work could also put downward pressure on wage growth in the longer term, as part-time positions typically offer lower hourly rates than full-time roles.The unemployment rate also rose to 6.6% from 6.4%, which, while moderate, reflects deeper issues in the labour market. More critically, the number of Canadians unemployed for 27 weeks or longer surged by 85% year-over-year. This rise in long-term unemployment indicates that while layoffs have not occurred en masse, individuals who do lose their jobs are finding it increasingly difficult to re-enter the workforce.Also noted in the September Edge Realty report, over the past six months, the number of unemployed has increased by 15%; other than during the pandemic, the last time an increase of this level was seen was in 2009. This increase in unemployment and the lack of job creation has reached troubling levels. Canada’s Sahm Indicator, a key metric that tracks the three-month change in the unemployment rate, rose to 97 basis points. Historically, this level has been an accurate predictor of recessions.Long-Term Unemployment on the RiseAnother troubling aspect highlighted in the September Edge Realty Report is the rise in long-term unemployment. Long-term unemployed individuals—those out of work for 27 weeks or longer—are increasing at an alarming rate. Over the past year, this group has grown by 85%, signalling a deeper issue in the labour market. Once individuals find themselves unemployed for an extended period, it becomes significantly more challenging for them to re-enter the workforce, due to factors such as skill deterioration, a potential mismatch between their skills and the available jobs, and the stigma often associated with long-term unemployment.In August 2024 alone, the number of long-term unemployed rose significantly, contributing to the broader rise in unemployment. This is a concerning trend as long-term unemployment often leads to social and economic challenges, such as increased reliance on government assistance, heightened poverty rates, and a negative impact on overall consumer confidence.While outright layoffs have not yet occurred on a large scale, several indicators suggest that Canada could be at the beginning of an employment downturn. Employers typically curtail hiring before initiating layoffs, and the stalling of job creation may be a precursor to more significant cuts in the near future. A weaker labour market also tends to reduce consumer spending, which could, in turn, further slow down the economy.
What do Canadians want most in a home? Buyers still dream of renovated, suburban single-family houses
A new survey from Wahi that explored what type of home Canadians would most like to buy reveals that many homebuyers still dream of owning a renovated single-family home in the suburbs, despite ongoing affordability challenges. Single-family homes preferred among nearly two-thirds of homebuyers; most want suburban living The survey found that 64 per cent of potential homebuyers prefer single-family homes, particularly those that are larger, renovated and located in suburban (38 per cent) or urban (34 per cent) neighbourhoods. Three-bedroom homes were the most popular option (43 per cent), with only 28 per cent of respondents opting for rural living.What’s more, a previous Wahi poll found that despite elevated interest rates and home prices, about 20 per cent of Canadians say they’ll probably or may buy a home in 2024. Regional and demographic differences However, regional differences emerged. In provinces with more affordable housing markets, like Saskatchewan/Manitoba (82 per cent) and Atlantic Canada (77 per cent), the preference for single-family homes was even stronger. Atlantic Canada was also the only region where most respondents (58 per cent) wished to live in a rural area.Meanwhile, high-cost provinces like British Columbia saw a lower demand for single-family homes, with only 52 per cent of respondents choosing this option.“Canadian cities like Vancouver, Montreal and Toronto all have great urban cores with lots to do, so some potential homebuyers may also choose condominiums to be closer to the action,” explains Wahi CEO Benjy Katchen.Younger Canadians (18-34) are most likely to prefer single-family homes, with 67 per cent wanting this type of property, though they also prefer urban settings (34 per cent), while older generations (55+) are more inclined to downsize, with only 50 per cent choosing single-family dwellings. Turnkeys favoured over fixer-uppers When it comes to the condition of their future homes, the majority of Canadians (64 per cent) would prefer a renovated property, with older buyers (55+) especially drawn to turnkey homes to avoid the hassle of renovations.About 23 per cent would consider a fixer-upper, but only 2.0 per cent are interested in a complete tear-down. While the dream of homeownership has evolved, Wahi’s survey shows that Canadians still prioritize suburban living and single-family homes, even in today’s competitive real estate market. Enjoying this article?Get the latest REM articles in your inbox 3x week so you stay up to date on the latest in the Canadian real estate industry Success! Email Subscribe The post What do Canadians want most in a home? Buyers still dream of renovated, suburban single-family houses appeared first on REM.
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