(9/22/2011) Erate Exclusive - Spurred by increased college enrollments
and the related potential for rent hikes in student housing, investments in
the sector are getting easier to finance.
For the big boys and girls, NREI says the most aggressive lenders might
quote a rate as low as 4.5 percent to 4.75 percent for a seven-year
solid-asset secured mortgage. Low-5 percent rates are more likely with a
10-year transaction.
Lenders active in student housing limit loan-to-value
ratios to 70 percent, but a strong owner-operator could get a ratio as high
as 75 percent, even 80 percent from construction lenders.
The best student housing properties aren't run-of-the mill, NREI
reports.
Students and their parents want:
• Connectivity. High speed broadband Internet connection is
paramount.
• Online amenities. College families are busy. They don't
have time to schlep out to each campus looking for housing. They want online
search, application and rent payment services.
That doesn't just mean laptop or desktop computer access, but access via
smart phone, tablet and other mobile devices.
When problems arise students also want to communicate with apartment
managers via text and email rather than the phone or in person.
• Apartments, not dormitories. Students want what they
have at home, their own bedroom, bathroom, maybe a pool, workout facility or
quiet room for study groups.
Potential real estate investors can find hot properties off campus, but investing in a REIT (real estate investment trust) that
has a student housing portfolio is another option.
That's especially true for on campus properties.
Experts say cash-strapped institutions of higher education want to focus
financial resources on academics and more may outsource their housing
needs.
"REITs, armed with access to public equity and a relatively low cost of
capital, are actively supplementing off-campus projects with various models
of on-campus development activities," NREI reports.
