Invest in student housing. It is one of the best ways to make money in real estate over time. There are obviously no guarantees investing in real estate, but student housing does offer the following attractive attributes.
Let's review why RealtyMogul is one of the best ways to invest in student housing. As students return to campuses in the Fall of 2020 and Spring of 2021, the demand for student housing buildings should increase.
Why Invest In Student Housing
1) Defensive in a downturn.
As long as the college or university is in good standing, student housing economics is quite resilient because of perpetually high occupancy rates. Not only do student housing occupancy rates remain stable during economic booms, they may actually rise during downturns because of increased college attendance and graduate school attendance.
During the 2008-2009 financial crisis, there was a 50% surge in applications to business schools because people lost their jobs and/or needed to bolster their skills and knowledge.
Only about 35% of Americans have college degrees. But this percentage continues to increase over time as more and more Americans believe college is the way to a brighter future. Heck, there are even already wealthy parents bribing college officials $500,000 to get their kids into schools like USC, Yale, and Georgetown!
2) Students are taking longer to graduate.
Only about 56% of students now end up completing their degrees in six years as opposed to four years. Super seniors are simply much more popular nowadays.
3) Increased occupancy rates and rental rates.
With a higher college enrollment and students taking longer to graduate, occupancy rates and rental rates have continued to increase. Average occupancy rate is roughly 98%, up 3% year over year.
4) Increasing foreign demand for US property.
United States property is cheap compared to the rest of the world. And money flows from expensive regions to less expensive regions to capture economic arbitrage. Not only is expensive coastal city money buying property in the heartland of America, foreign investment managers are buying property in all of America due to the relative value.
5) Less rental income volatility.
At the end of the day, you want to buy property for its steady cash flow and upside appreciation potential. Student housing has some of the most steady income streams in the commercial real estate market.
RealtyMogul: Best Way To Invest In Student Housing
RealtyMogul was founded in 2012 after the JOBS Act was passed. They are one of the best real estate crowdfunding platforms as they are focused on steady and stable growth. If you want to invest in student housing, RealtyMogul is one way to do so.
I spoke with the CEO and co-founder, Jiliene Helman at length before and we also had lunch in San Francisco. I like how she spoke to me about the importance of quality and building a multi-generational business.
Here are some positives about the RealtyMogul platform.
1: RealtyMogul Does Good Due Diligence
Many critical pieces of information are reviewed before investment opportunities are approved and opened up to investors.
In real estate circles, this analysis is called due diligence.
RealtyMogul provides due diligence on behalf of their investors, and here are five core criteria they consider during the due diligence process.
A) The Real Estate Company
The first thing that one should look at when analyzing an investment is the real estate company involved in the project. This is also known as a sponsor, who is an individual or real estate company that will acquire the real estate and execute on a business plan.
B) The Market
The second thing we review when looking at a real estate investment is the market of the property. Realtors often say that the only thing that matters is “location, location, location” and not without good reason.
C) The Asset
While the real estate company and the market are both important, so too is the asset, or the property itself. It is important to review not just whether it is the right time in the real estate cycle, but also whether it is a good time to purchase the asset. The asset is so key to the investment that at RealtyMogul we do an in-person site visit for every investment.
D) Capital Structure
When investing in commercial real estate, the capital structure must be looked at closely as it directly impacts the return.
Moreover, real estate companies can further complicate the capital structure of a transaction by adding a combination of a second lien, preferred equity or mezzanine debt as a layer of capital in between the senior mortgage and the common equity. The terms of each of the slices of capital have material impacts on the others.
E) Risk and Return
The last, but not least (and arguably the most important), thing that an investor should look at when determining whether to invest in an opportunity is the risk/return of the project.
Once it is determined that each of the elements of a transaction are on point, on balance and strong enough to accomplish the stated investment goals, it is worth considering making an investment in the opportunity.
2: RealtyMogul Provides Strong Investor Benefits
Real estate investors all get solid benefits through RealtyMogul, which further makes these folks a reliable source of potential wealth.
For example, Realty Mogul offers:
1) Pre-Vetted Investments — Less than 10% of the deals first shown on the Realty Mogul make it through to their platform for their investors. The vetting goes through the sponsors history, track record, and individual backgrounds to ensure deals have the highest chance of providing a positive return.
2) An Easy Process To Invest — Real estate crowdfunding is taking off largely due to its ease of investing. Realty Mogul’s platform allows investors to thoroughly analyze a deal with the research provided. An investor can view pictures, videos, and even ask the sponsors questions before making an investment.
3) Opportunities That Are More Focused Than REITs — A publicly traded REIT generally has dozens, if not hundreds, of properties in its portfolio. It’s harder to invest in specific areas of the country, such as the heartland, or the east coast, or the west coast with a REIT. Real estate crowdfunding with Realty Mogul allows you to be much more surgical in your investments.
4) A Low Investment Minimum – Instead of coming up with a $200,000 downpayment for a median-priced San Francisco or NYC property and borrowing $1,000,000, you can invest as little as $10,000 in a property on the Realty Mogul platform to gain exposure.
3: RealtyMogul Provides More Access
With RealtyMogul, investors can diversify their real estate investments through a wide range of opportunities available around the country. These investments include commercial real estate projects that would normally set individual investors back 10s of millions of dollars.
Through the power of crowdsourcing, RealtyMogul provides more opportunities for more people, which brings potentially lucrative real estate investments within reach of the average investor.
Investment examples include:
- multi-family dwellings,
- office buildings,
- industrial sites,
- self-storage,
- retail,
- medical buildings, and
- hospitality establishments
- student housing
RealtyMogul enables typical investors to invest in single-family properties that are bought for the purpose of rehabilitation and flipping. Just about any property can be invested in as long as it is not used as a primary home or as a secondary residence.
Related: Detailed RealtyMogul Overview
4: RealtyMogul Simplifies The Investment Process
With RealtyMogul, investors typically purchase shares in a Realty Mogul limited liability company (LLC) that turns around and invests that money into an LLC or Limited Partnership (LP) that holds title to the real property.
Investing in this way minimizes overhead for the investment sponsors. Further, it provides access to more investment opportunities. Finally, there is streamlined reporting of distributions through the platform.
Loan investments are generally 6-12 months, while equity investments are anywhere from three years up to 10 years. Equity investments generally pay distributions on a quarterly basis, while debt investments pay monthly.
These are just general rules, and it’s important to understand the distributions on any investment are never guaranteed.
5: RealtyMogul Has A Long Track Record
Since their founding in 2012, Realty Mogul has distributed over $100M, has 170K members, and has funded over $2B in property deals.
What’s interesting to note is that as of 4Q2020, Realty Mogul has not raised any additional venture capital money. This means to me that RealtyMogul has found a way to be self-sustainable as they focus on quality, not quantity. Unlike other platforms, they are not growing at any price and are focused on the bottom line.
Given they have higher barriers for whom they do business with, it feels like they really are focused on hitting singles and doubles instead of home runs, which is more in line with how I like to operate my own business.
Invest In Student Housing: Steady Income
Real estate is one of the best ways to build wealth over time. Real estate is easy to understand, provides utility, has a steady income stream, and rides the inflation wave. The original billionaires all were massive land owners.
Sign up for RealtyMogul for free and explore all they have to offer. Not only do they have occassional student housing investment opportunities, they've also got a couple REITs and many more innovative offerings to review.
About the Author: Sam started Financial Samurai in 2009 as a way to make sense of the financial crisis. He attended The College of William & Mary and UC Berkeley for b-school. He also worked at Goldman Sachs and Credit Suisse for 13 years. He owns properties in San Francisco, Lake Tahoe, and Honolulu and has $810,000 invested in real estate crowdfunding.