How can you earn money on student housing?

In most Polish cities, there is a boom in the rental of flats for students. Prices are rising and even the least attractive premises are disappearing from the market at the speed of light. Therefore, many people ask themselves the question: how can you make money from such an economic situation?

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.

Buying real estate is not the only way out

The most obvious way to make money on real estate is to buy and rent it. However, this requires capital to purchase the entire apartment, which in Poland means the need to have at least 300. PLN, and in Warsaw even 500. zloty. Currently, however, the market is so hot that it is difficult to find attractive properties to buy. In addition, the apartment needs to be renovated, and there is a shortage of free construction teams on the market. Not to mention the more expensive building materials.

In more developed markets than Poland, we will find companies and funds that invest in apartments for students. It is a very interesting supplement to our investment portfolio allowing exposure to the student rental market.

REITs, actions

The largest player in the student housing market in the US is the company American Campus Communities ($ ACC), since 2004 listed on the NYSE. The company operates as REIT - Real Estate Investment Trust, i.e. a fund investing in real estate. REITs are now an increasingly popular tool for investing in real estate, which also allows people who have small amounts of money to do so. Most REITs focus on a selected part of the real estate market, such as offices, commercial or residential spaces. ACC is a REIT focused strictly on accommodating students in flats and dormitories of a higher standard.

At the end of March 2021, ACC had 166 of its own properties providing 111 beds. Including non-owned properties that the company manages, its portfolio included 900 properties with 207 beds. This is more than the number of full-time students in Warsaw. The company is headquartered in Austin, Texas, and offers real estate at 142 universities primarily in the southern US. An average property gives the company an annual profit of 400 percent. - 68 percent

The company managed to cope with the pandemic, although initially the value of its shares fell by more than 50%. Currently, the share price is down 5,9 percent. higher than February 25, 2020 (at the same time S & P500 increased by 40,6%). Despite the fact that most universities have introduced distance learning, the company has managed to fill its properties at least partially. However, the pandemic showed that the company itself is exposed to such demand shocks. Since the beginning of the year, ACC shares have increased by 22,4%, comparable to the S & P500 (+ 21,5%). The company plans to return to pre-crisis profits in 2022.

When investing in student housing, it is worth considering a wider diversification based on the residential real estate market. Such exposure may be provided by other companies from this market, such as e.g. Avalon Bay Communities (flats), Equity residential (apartments) or Sun Communities Inc (modular houses, recreation centers).