INVESTING IN STUDENT ACCOMMODATION : PRO'S AND CONS

With the end of the year only a few months away, the historic town of Stellenbosch in the Western Cape's Boland region is entering its annual "apartment season". This is when parents seek accommodation for their children who will be students at the town's acclaimed university next year. Every year about this time estate agents start advising parents / investors to consider the advantages of buying an apartment for their offspring rather than paying rent. Thousands of students have to rent accommodation privately, and there is therefore a huge opportunity for investments in student accommodation.

If you can afford to buy rather than pay rent, at the end of your child's studies there is a very good chance that you will be able to sell at a price that not only recovers your full outlay but also in many cases will actually cover the full university costs. As for prices, bachelor flats of 20 to 65 sqm can currently be obtained for anything from R450 000 to R1,5m. Larger apartments with multiple rooms are all prices over R1m. Apartments located within the university campus are particularly popular, not only for their proximity to lectures and libraries, but also for their access to the legendary Maties social life. As a result, these units tend to command the highest prices, and can also attract the highest rental income. A two bedroom unit in a new block on campus can attract up to R6 800 per month in the current rental market.

With an investment in student accommodation you will always be assured of tenants, which is the first requirements for an investor. With safety an issue and parking a huge problem, parents prefer their children to rent close to campus and are willing to pay a competitive rate to get their children into these properties. For the long term investor, a good annual yield is therefore combined with capital growth, which resulted in overall good investments.

Interesting facts about a well planned rental portfolio include the following:

• Although students need accommodation for less than 10 months per year, rental contracts run from 1 December to 30 November, thus rent is paid for 12 months.
  
• Return on investment yield differs from block to block, and it is sometimes completely subjective, because of a spesific vibe or "image" of the block. It is crucial to take this into consideration.
  
• The balance between yield and capital growth also differ from block to block.
  
• There are now fantastic opportunities available in established blocks and several new developments.

Unfortunately there are also negatives, and investors need to be careful for some of these. Typical pitfalls to be aware of are:

• To get the best rent (yield) your planning and strategy should be perfect - for example - when should you look for the next year's tenant. Most prospective tenants start looking for accommodation around September / October.
  
• Avoid different contracts per room if you have different students per room in the same property.
  
• The rental environment is a challenging legal environment, and it is critical to ensure technically correct procedures, documentation, etc for peace of mind. It is easy to loose money with rentals - make use of an experienced rental agency.

The best advice for potential investors is to do the complete process - from selecting the property to the management of the rental - in partnership with experienced and professional people like IRMA KNIPE PROPERTIES that specializes in student accommodation on Stellenbosch campus. Contact these agents if your require more information: