It is full of opportunities, but investors need to be aware of its unique features that challenge managers of such developments. When designing student housing developments, one question an investor should consider is whether to provide furnished apartments as opposed to the more conventional unfurnished models.
Furnishing a student apartment is an additional capital cost, akin to what is seen in the hotel industry. A furnished apartment needs a twin-sized bed for every tenant, a desk, tables and chairs for the dining and living room areas and, in the luxury student housing residences, flat screen televisions.
Addressing the luxury market in student housing
These may be expensive to invest in, but there is no shortage of high-income students looking for luxury accommodations. Students, and their parents, will appreciate not having to move in loads of their own furniture, and will pay a premium for these extras. Amenities such as free wireless Internet will attract attention within the local student housing marketplace, putting such an apartment ahead of others and making the move-in process easier and stress-free.
Furnished apartments can also save apartment managers money in the long run, since making the move-in process easier also means making it less damaging on the property itself. No more scuff marks on the walls as furniture is moved in in September and moved out in June. And although a furnished apartment carries with it a risk of increased costs, with more furniture potentially needing replacement after a school year is finished, this risk can be managed and covered through the use of security deposits.
The advantage of a blank slate
On the other hand, unfurnished apartments have their own advantages. The stress-free move-ins and move-outs of furnished apartments give students no sense of permanence, and little incentive to stay for multiple semesters. Once a family moves in a student’s possessions and a bed, there is great incentive to stick around. This reduces a manager’s need to fill vacancies after every semester.
Unfurnished apartments also save the cost of providing furnishings, and allow parents and students to furnish their room with their own style on their own budget. This may appeal to a wider swath of the student marketplace.
The decision to go furnished or unfurnished depends on the portion of the student housing marketplace you as an investor wish to address. A well-furnished apartment will stand out in the luxury market and attract considerable attention, but it comes with higher costs and it may price an apartment out of all but the top end of student demand. Other amenities may also provide more bang for the buck.
Knowledge is power
It all depends on the particulars of the marketplace. To navigate the marketplace, it helps to hire a consultant with experience in student housing who can bring a team of researchers to bear. You need to know what other student housing developments are out there, what they are offering, and the rents they are charging.
Gathering this information will help you make an informed decision about what to build, how to build it, what amenities to offer, and what rents to charge.
Derek Lobo is the founder and CEO of SVN Rock Advisors Inc., a real estate brokerage with over 30 years of experience in helping investors make the most out of buying, selling, and renovating purpose-built apartment buildings. Learn more about SVN Rock Advisors Inc., Brokerage on their website at www.SVNRock.ca.