A student accommodation business provides accommodation for students usually close to where they are studying. With a young population, it is currently one of the fastest growing real estate sectors in South Africa. It is also a valuable service to people who live far from tertiary or training institutions or who have too much distraction at home to concentrate.
There are a few strategies to consider when entering the student accommodation business:
Buy or Rent?
First thing you have to decide is whether to buy a property or rent one, obviously buying is the best as you have a full say over your property but also requires the most investment to get started or a long commitment to pay off a bond. Buy to rent is pretty self explanatory, but if you rent to sublet there are other considerations to consider and most importantly will the properly owner allow you to sublet the premises especially to a large number of people. Depending on the area some landlords won’t care as they are too happy to have the property let especially if you are able to make the timely payments every month.
A rent to sublet business model looks something like this:
You rent a three bedroom house for R6000 per month, you put two students in each room and charge them R2000 a month each. That is R2000 x 6 = R12000, from the R12000 you pay the rent (R6000) and the rest (R6000) is profit. Do this with ten properties and you have a nice small business.
Tertiary Education or Other Training Students?
This might not seem obvious at first, but this is important to consider especially if you don’t have a lot of capital to enter this business. Properties close to universities sell and rent at a premium because the owners are aware of its value. The closest to the institution the better and more valuable it will be.
However if there are other type of training institutions close by, this may not be obvious at first that this property can be utilised in this way. People will think that the student that go there have a home, but this is not the case there are a lot of niche training institutions in South Africa that are far away from their students, not necessarily in big towns but far enough away that will make it prohibitive to travel daily. These courses are usually short from one month to three months. And a lot of students would like to attend it but cannot get affordable accommodation close by.
Type of property
This is very important both when buying and renting, not every property is suitable for student accommodation. If you could choose the best type of property then fully owning a large apartment building would be best, otherwise there are other characteristics to look out for.
- Either has many small rooms (preferable) or few large rooms (to share)
- Has large communal areas: lounge and kitchen
- Has more than one bathroom (depending on amount of students)
- Has both inside rooms and separate entrances accommodation for students wanting extra privacy.
|Setup cost||Capital required for investment in property|
|Related Ideas||Buy a Real Estate Property and Rent it Out (sideline)
Offer Short-term Accommodation for Major Events