Background
Investing in student hostel can be a rewarding experience. However, it is important to be aware of the pitfalls/challenges, as well as the opportunities.
The number of schools and students has risen geometrically in recent years. As education continues to be a priority these numbers will continue to rise further.
Our guide outlines the opportunities and challenges of investing in student hostel as well as the pros and cons of letting your properties to students. It provides you with the germane issues to consider as you ponder on this sphere of property investment.
State of the Market
Sharp increase in the number of students has partly been due to government initiatives to encouraging more young people to study. The reality of education as the bedrock of development and personal accomplishment in life remains a salient point in our national psyche. For this and more, more schools will continue to spring up, students will continue to enrol and accommodation will continue to be in issue.
Presently, no public school in Nigeria can boost of adequate hostel accommodation for the students. While few can afford to accommodate a microscopic number of its population, others have no single hostel erected for the students.
The state of the very few hostels available most times tell of a very bitter story, making students look outside of the school arrangement for refuge. Consequently, privately built hostels have come under incessant rush by students across the country.
Incidentally, this privately built student hostels are still grossly inadequate. They are currently not commensurate to the level of demand placed on them, making more students to still operate from homes.
The number of students living both at home and privately built hostels have risen sharply in recent years, since the number of school built student hostels has not kept pace with the rise in student numbers as well as increasing test for comfort and security of students.
This leaves a gap, in fact a very wide gap for discerning property investors to fill.
Benefits
Property investment generally no doubt is a worthwhile venture; student hostel in particular has more peculiar benefits:
- By nature of students, they will move on, so you are not committed to long time contracts.
- It is generally easy to find student tenants if your property is reasonably close to a school.
- There is excessive demand over supply, so rents naturally are expected to continue on the upward swing in the coming years leaving you with double digit cash flow.
- Student hostel need not be state-of-the-art. Any property with multiple rooms is fit and proper.
- Virtually all parts of the building are put into use, since students don’t even mind letting a living room or even supposedly packing store as a bedroom.
- It is relatively cheaper and faster to furnish a student accommodation as virtually interior requirements are at minimum.
- Most tenancy bottle-necks may not arise. For instance, unauthorised subletting is never in issue as time of departure of any student tenant is determined even from the point of possession.
- Arguably, the laws of landlord and tenant may not apply wholesale as students are not necessarily full tenants with right of exclusive possession.
Challenges
- Student letting posses credibility problem as students generally cannot provide credible references.
- At the extreme, if your student tenants are disruptive, dubious and diabolical, you could face gangsterism problems.
- Student hostel attracts lower capital appreciation than other types of property.
- Utility bills are almost always catered for by landlords of student hostels but the effect if any is always very minimal.
What Students Want
- Students generally wish and seek for the best value and the most convenience. If you can keep your price below that of most competing landlords your hostel will be in high demand by students.
- Note however, that hostels located within a reasonable distance from school premises most times break price resistance levels. Such, are hot properties and irrespective of prices they are always on high demand.
- Students most times prefer certain areas in the school vicinity. Find out where it is and cash in.
- Proximity to transport, shops and eateries is also considered by students. They prefer not to travel too far on foot. Most don’t have cars.
Conclusion
In totality, student hostel is a reliable and worthwhile property investment option. Students are a ready and captive market since they have a limited choice of accommodation offered by their schools. They are generally tolerant, easy going and understanding compared to conventional tenants.
Note further that students will continue to add up in numbers and so will the need for student hostels continue to rise, as well, so will investors in this area continue to reap bountiful cash flows.
Contact Palydom now or email us at info@palydom.com, for a FREE, No Obligation consultation regarding any of your property related issues or requirements.