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Speciality CRE Spotlight: Student Housing

Speciality CRE Spotlight: Student Housing

Bozeman and Missoula have recently been in the headlines for student housing shortages, even in national news. For these communities, finding places for students to live is critical. As universities have seen enrollment outgrow the number of dorm rooms, they’ve looked to the private sector for help.

Student housing operators bridge the gap between university-built and owned dorms and traditional rental homes. Their developments may be located on campus property or they may be located off-campus, usually within an easy walk or drive.

Today’s Student Housing

If you went to college before the turn of the millennium, you might recall contraband hot plates, rickety bunk beds, and funky bathrooms shared with 20 or 30 of your closest classmates.

Student housing today looks a lot different. Many offerings include options that allow students to have a private bedroom and bathroom. Kitchens and living rooms may be shared by just a few students.

Amenities in student housing are a big deal. Gone are the days when a study lounge with an old couch sufficed; now, students enjoy pools, fitness centers, and yoga studios.

Rents and Leases

The downside for students is that housing near a university won’t come cheap. At the end of 2021, the average student housing rent was $791 per bed but was breaking $1000 in many markets.

The upside for students is that leasing in a student housing complex is a lower risk than renting a traditional apartment with roommates. Leases are typically structured so that each student has their own lease. If a roommate falls behind on payment or breaks their lease, the other roommates have no financial obligations associated with the defaulted lease.

Interested in Investing in Student Housing?

Student housing is known for being a stable commercial real estate asset. In recessionary phases, college enrollments generally go up. However, like all real estate, performance can vary based on location. Investing in a portfolio with many locations can help lower the risk.

Average student housing cap rates dropped to just above 5% at the end of 2021. Typically cap rates are slightly higher in smaller markets (like Bozeman and Missoula).

When assessing a student housing investment, note that students can be tough on housing. Operating expenses are typically higher than a similar multifamily community.

Where can I see these in Montana?

For students in Missoula, ROAM is the newest student housing complex. With modern finishes, a stylish downtown location, and amenities including a fitness center and grilling station, it’s a popular option. Rents range from $715 for a shared four-bedroom to $1400 for a one-bedroom, in line with rates at traditional rental communities.

Similarly, The Arrow in Bozeman offers apartments that can be leased by the bedroom. The property has a laundry list of amenities like a pool, tanning beds, and a gym. Parents worried about security are offered controlled access and a 24-hour patrol officer. The property is leased up for 2022-2023. Rents start at $1,030 per month and top out at $1,650 for a private one-bedroom unit.