Invest in student accommodation for solid returns

Invest in student accommodation for solid returns

Private Property South Africa
Sarah-Jane Meyer

The ongoing student-housing shortage throughout South Africa provides rewarding opportunities for buy-to-let investors.

For many years now, South African universities have only been able to accommodate around 50% of applications for residence, while the remaining students are left to fend for themselves.

A recent survey by the Department of Education of the 50 plus public technical and vocational education and training colleges in the country, revealed that just over 10 000 residence beds were available for the over 700 000 students in these institutions – a significant undersupply. At present there are well over one million students registered at private and public universities in South Africa. And there has been an unprecedented increase in the number of student enrolments across sub-Saharan countries in the past decade.

With demand significantly outstripping supply, this creates wonderful opportunities for property investors and a number of developers are now targeting this sector. According to professional services and investment management firm, JLL, there is substantial evidence that the private sector will become progressively more involved, because student housing projects in sub-Saharan Africa are not only viable, but are among the most attractive investments you can make on the continent.

Suitable properties

There is strong demand for sectional title apartments, either within walking distance of campuses or in areas well-serviced by public transport. In the suburbs surrounding the University of Cape Town, for instance, Rondebosch and Rosebank are most popular as they are closest to the campus. However, since the inception of the Jammie Shuttle student bus service, the areas of choice now extend to Observatory and Mowbray as well as Newlands, Claremont, Kenilworth and even Wynberg. If you decide to buy a sectional title unit, you need to keep in mind that you are also buying into a sectional title scheme. It’s important not to get caught up in the excitement of buying an apartment, and you need to ensure that you are well informed about the property and the scheme. Before signing an offer to purchase on a sectional title apartment you need to examine the minutes of the latest annual general meeting, as well as the conduct rules of the scheme and the body corporate’s latest financial statements.

Increasingly, investors are also buying large older homes in areas close to universities and colleges, and then, after some restructuring, renting out rooms to students. Although they may pay regular market prices for these properties, the competitive monthly room rentals enable them to significantly enhance their yield in the long run.

In Johannesburg, Cape Town and Durban, some developers have repurposed office buildings in the central business districts as student accommodation. Many of these are for sale to private investors, who can place their units in the professionally managed rental pools.

Amenities required

Security is a priority for most students, so features of a complex should include biometric access control systems and CCTV camera surveillance. Bicycle storage areas and secure parking are other requirements. Many purpose-built student accommodation include amenities such as on site gyms, swimming pools, coffee shops and laundry facilities.

Furnishing and fittings

Furnished rooms should have a comfortable bed with a good quality mattress, black-out curtains, an en suite bathroom, a TV, a study desk and chair, a bookcase and a built-in cupboard. The communal areas should have a seating area, a kitchen with a fridge-freezer, a stove, a microwave, a kettle and a toaster.

Lease agreements

When letting accommodation to students, it’s advisable to also require the parents of the students to co-sign the lease, so that they are equally liable for any destruction of property or defaults in rent payments. The parents are often the ones paying the rent, so stating this in writing will ensure they take full responsibility for timeous rent payments and behaviour issues.

Although 18-year olds are legally allowed to sign contracts, it is unlikely that many students have a high enough credit rating at that age. This means the parents would be the ones whose credit records prove they qualify for rental agreements. If there are two parents, you need to do credit checks on both before they sign the lease – don’t assume that because one parent is creditworthy the other is too.

You can also request that certain clauses be added to the lease agreement - for instance, specifying no loud music or other noise at certain hours, house rules and etiquette requirements. Because the parents are also liable, it is in their best interests to ensure their student children adhere to these rules.


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