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Why Student Housing is Different from Other Real Estate Investments



When seeking an investment that offers the potential for an income stream, real estate may be a wise option. A 2018 study found that private market commercial real estate returned an average of 9.85 percent. Not bad! Real estate investments historically have provided a reliable passive income and can help you build wealth. The question is, among all the available options to invest in real estate, what do you believe has the best potential? Answer: student housing.

When compared with other real estate investments, student housing is remarkable for its potential cash flow, stability, and diversified revenue sources. These potential benefits are just a few reasons student housing has picked up and is one of the hottest commodities in the real estate business.

Cash Flow: Commercial vs. Non-Commercial Real Estate

Unfortunately, most financial advisers automatically downplay real estate. That’s because they associate real estate with traditional residential purchases, in which properties are leveraged around 70 or 80 percent and there is no cash flow revenue to support the mortgage payment. Financial advisers also caution that if your property is used as a rental, it may be extremely labor-intensive for you and may not be worth the return.

Student housing investments, however, don’t have these same problems. Commercial real estate, which includes student housing, is valued highly because of its potential for cash flow or net operating income.

Stability: Student Housing vs. Other Commercial Real Estate

Typical commercial real estate presents a problem—properties such as retail offices are closely tied to real estate cycles or business cycles. Cash flow may not be as possible when it’s not sale season, for example.

You may be thinking, “Doesn’t student housing also have a season? Wouldn’t revenue decrease when students return home for the summer?” But that’s not quite the case. Demand for student housing is tied to the university, and these institutions are historically among the most stable. Most universities survive economic depressions, wars, and shifts in cultural priorities.

The new model for student housing, which involves 12-month leases, is currently very investment friendly. Even if the student goes home for the summer, rent is still paid. The most important part? Parents are cosigning and guaranteeing the rent.

Diversified Revenue Source: Affluent Properties

If you invest in an affluent property, you have a potential advantage: more often than not, Mom and Dad are paying the rent, not the 20-year-old student. Most of these parents are homeowners with steady incomes, so your net operating income has the potential to be more consistent—you may not have to worry as much about turnover costs and evictions. When you’ve invested in an apartment complex with hundreds and hundreds of students, the income from all those cosigned parents makes for the potential for a well-diversified revenue source.

If you’re going to invest, consider investing in real estate. If you’re going to invest in real estate, consider investing in student housing. We believe, that of all the real estate investment options out there, student housing has the best potential to provide cash flow, stability, and diversified revenue sources than other real estate investments. Read about our strategy to learn how you can start investing in student housing in the best way possible.

Offering Disclosure:
The contents of this communication: (i) do not constitute an offer of securities or a solicitation of an offer to buy securities, (ii) offers can be made only by the confidential Private Placement Memorandum (the “PPM”) which is available upon request, (iii) do not and cannot replace the PPM and is qualified in its entirety by the PPM, and (iv) may not be relied upon in making an investment decision related to any investment offering by an issuer, or any affiliate, or partner thereof (“Issuer”). All potential investors must read the PPM and no person may invest without acknowledging receipt and complete review of the PPM. With respect to any “targeted” goals and performance levels outlined herein, these do not constitute a promise of performance, nor is there any assurance that the investment objectives of any program will be attained. All investments carry the risk of loss of some or all of the principal invested. These “targeted” factors are based upon reasonable assumptions more fully outlined in the Offering Documents/ PPM for the respective offering. Consult the PPM for investment conditions, risk factors, minimum requirements, fees and expenses and other pertinent information with respect to any investment. These investment opportunities have not been registered under the Securities Act of 1933 and are being offered pursuant to an exemption therefrom and from applicable state securities laws. All offerings are intended only for accredited investors unless otherwise specified. Past performance are no guarantee of future results. All information is subject to change. You should always consult a tax professional prior to investing. Investment offerings and investment decisions may only be made on the basis of a confidential private placement memorandum issued by Issuer, or one of its partner/issuers. Issuer does not warrant the accuracy or completeness of the information contained herein. Thank you for your cooperation.

Securities offered through Wealthforge, LLC Member: FINRA/SIPC. Only available in states whereWealthforge, LLC is registered. Wealthforge is not affiliated with any other entities identified in this communication.

Real Estate Risk Disclosure:
  • There is no guarantee that any strategy will be successful or achieve investment objectives including, among other things, profits, distributions, tax benefits, exit strategy, etc.;
  • Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments;
  • Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities;
  • Potential for foreclosure – All financed real estate investments have potential for foreclosure;
  • Illiquidity – These assets are commonly offered through private placement offerings and are illiquid securities. Private Placements are Speculative.
  • There is no secondary market for these investments;
  • Private placements carry a high degree of risk
  • Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions;
  • Impact of fees/expenses – Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits;
  • Stated tax benefits – Any stated tax benefits are not guaranteed and are subject to changes in the tax code. Speak to your tax professional prior to investing.

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