It is amazing all the new types of REIT investments out there these days, especially now that the real estate market has shown a sharp uptick from the dire days of the housing collapse in 2008. But what type of real estate should you invest in? If you invest in a REIT you could put your money into commercial real estate, high-rise buildings, residential home rentals, storage units, old folks homes, or even college dormitories or apartments for University students. Let’s go ahead and talk about the latter we might.
If you’re going to invest in apartments for college students then you should also be aware that the academic industrial complex bubble could someday burst. We all know that student loans may run for a couple more years because Congress has enacted a law which disallows the raising of interest rates on those college tuition loans. However, because there is so much fallout, and a high default rate, eventually those interest rates will have to go up to meet the market reality.
If they don’t, then fewer private companies are going to lend money, and we won’t be able to count on the taxpayer or the government to guarantee those loans to bail them out when they fail. If students can’t keep getting loans for college tuition, then they won’t be able to afford the ever-increasing cost of tuition, therefore they will not go to school, therefore there will be too many apartments available. If that happens the price will go down, and the occupancy rate will go down, and these investments will fail.
However, if you can find a college apartment REIT which has college student apartment rentals at colleges with low tuition rates, then students can go to those schools without taking out student loans, and therefore the occupancy will stay very high. In fact even higher because students who can’t afford now to go to the larger universities will fall back to these less expensive colleges, and you could even see 100% occupancy.
Lastly a word of advice, look for a college apartment REIT which is highly efficient, where the cost of doing business is lower, and perhaps in areas where the real estate isn’t as expensive, but where the area is built out, and there are no major changes in master planning.
A REIT which specializes in smart properties of this type, runs their business efficiently, and is situated in colleges with lower cost tuition will easily survive the implosion of the future coming collapse of the student loan bubble that we are now building. At least that’s my view on the subject. Please consider all this and think on.
CYA: always consult a certified financial planner, accountant, and proper professionals before making any major investment.