What is Student accommodation?
Is asecureandprofessionally manageddwelling placeforthe accommodationof student(s) who is/areregistered atanacademic institution, withcommunal areaswhichincludelounge/dining room,kitchenand bathroom(s);servicedand maintaineddaily/weeklyand conducive tostudyingandpersonalwellbeing.
How To Start Student Accommodation Business In South Africa
1.Decide On Your Strategy
First thing is to decide whether you want to buy a property or rent one. Buying a
property is always the preferred way to go as you will not only benefit from your
monthly income but you will also benefit in the growth in value of the property over
time.
However when you are first starting out and you are not sure if you want to do
student accommodation long term as a business, then a rental option might work
better for you.
When you rent you need to get the owner to allow you to sub-let the property. Make
sure that it is stated clearly in your lease agreement that you will be sub-letting to
students. I always thought that no owner would allow this, but if the property is in a
traditional student accommodation area, chances are the landlord knows this already
and has rented to students before, so the answer is yes more often than not.
2.Find Your Area
This might seem obvious at first as we all know where the universities are in South
Africa. However I found that the suburbs close to these major institutions
Stellenbosch University, UCT, Potch, UP etc) are selling or renting at a premium. The
closer to the institution the more expensive it will be.
There are however multiple other institutions that cater for more niche subjects
such as arts and drama, nursing colleges or culinary schools and these are not on
everyone’s minds yet they also have huge housing needs.
As an example I placed 150 students in Atlantis Industrial right next to West Coast College. Very few people are even aware that there is a college in Atlantis. That building was purchased for only R4m on an installment sale with R1m renovations and is bringing in R225000 a month! If the owner knew the value of this the price would have been much more.
3.Type Of Property
House configuration: If you want to buy a property it needs to be in a traditional format or the bank will
not approve your finance application. What does this mean? If the previous owner removed the kitchen
and added drywalls to make it a room, the bank will not approve the finance. It needs to have a kitchen,
lounge, bathrooms and bedrooms. If you rent this is less important but the students still need a decent
place to cook or to prepare meals.
As many bedrooms as possible. 8sqm a room will be suitable for a single person and 12sqm for a double.
Don’t be scared to also do one or two triple or quad rooms. These are great for students with a smaller
budget but make sure that you have a mix of room types as not everyone would want to share with that
many people. Check that there is enough cupboard space for the amount of people sharing!
More than one bathroom and en-suite doesn’t count.
You need to have more than one bathroom that is shareable by the whole house. Remember regulations…. 1 toilet for every 5 students and 1 shower for every 7.
A common area. You can use the lounge and kitchen as a common area. You will need space for people
to chill or a quiet area to study outside of their rooms.
The study area is not compulsory but I found that students love them especially where you have mostly sharing rooms. Check that there is enough space in the kitchen for the amount of fridges, freezers and stove tops that you would need.
4.Budgeting For Your First Property
Deposit and first month’s rent – if you are renting. Purchasing fees and deposit if you are buying.
Furniture for students, these are the obvious things like, beds, mattresses, study desk
and chair but also the not so obvious things like sanitary bins in the bathrooms, pots and
pans, cleaning stuff etc. For this (depending on your negotiations skill) you can budget
for R5500 to R6500 per student
kitchen appliances. You definitely need a big enough fridge and freezer. I prefer to get a
commercial fridge (like the cooldrink fridges you see in shops) with the largest deep
freezer I can find.
This caters comfortably for 25 students. The alternative that I use in
very large properties is to put a bar fridge in every room and one or two large freezers in
the kitchen. This helps to curb food theft or just a generally messy and stinky fridge.
Lounge:
I always add a lounge suite and a table (or plastic tables depending how smart your digs is) with a TV. Depending on the Wifi setup I provide Netflix for the students or provide reduced channel DSTV.
Frequently Asked Questions (FAQs).
Is student accommodation a good investment in South Africa?
Dustan Folkus, Sales Project Manager at Engel & Völkers Developer Driven Projects, explains that for investors,buying student accommodation offers an excellent return on investment. “Annual occupancy is usually at over 97%, and both rental value and retail value increase with the passing of each year.
How much does it cost to build a student accommodation in South Africa?
Current pricing to build student housing on campus is estimated atR320 000 per bed, which can increase to R550 000 when taking land costs into account.
Is student accommodation still a good investment in South Africa?
Many investors have chosen student accommodation because of the profits it produces. When you invest in accommodation close to higher learning institutions, you will receive a higher income per square meter and you are guaranteed to have tenants year in and year out.
Why is student housing a good investment in South Africa?
Historically, student housing has transacted at yields approximately 25 – 75bps above traditional apartments. Currently, the five-year average cap rate premium is 50bps, according to CBRE. For interested investors,demand is still strong, and the fractured nature of the market offers opportunity for investment.
How do I pay for my student accommodation in South Africa?
Most universities will ask you to set up a direct debit. Accommodation costs will then come out in termly instalments. Remember your student loans can help you to cover these costs. You’ll usually be required to pay a deposit on your student accommodation, which is refunded when the contract ends.
Can I live in student accommodation if I’m not a student in South Africa?
If you’re wondering whether you can rent student housing if you’re not actually a student, the answer is “maybe.”There is no universal policy regarding non-students living in student housing.
What is meant by student accommodation in South Africa?
Student Accommodation meansresidential colleges, halls of residence and other residences that are operated with the primary purpose of providing accommodation to students undertaking tertiary education.
Is student housing a good business in South Africa?
Student housing investment is an excellent asset class that has proven to be resilient to economic fluctuations. It has been known as one of the stable investment opportunities. The current coronavirus pandemic and the most recent economic recession have proven this point of merit.
Will NSFAS pay for private accommodation in 2021 in South Africa?
No, NSFAS does not pay private accommodation deposits or residence deposits.
Who qualifies for NSFAS accommodation in South Africa?
Applicants with a combined household income of less than R350 000 per annumare eligible. A person having a handicap: The total annual household income shall not exceed R600,000. Students who began their studies prior to 2018 and whose annual household income is less than R122 000.
Can you make money with student accommodation in South Africa?
Student accommodation is increasingly seen as a profitable area for property investors. There are various ways to make money from student accommodation from buy-to-let and renting to local students, to investing in purpose-built blocks and special types of REITs (real estate investment trusts).
How much do student landlords make in South Africa?
John Heron of Paragon says its figures suggest student properties typically enjoy a yield premium of around 27 per cent over the market average, putting student rental yields ataround 8 per cent.
What is meant by student accommodation in South Africa?
Student Accommodation meansresidential colleges, halls of residence and other residences that are operated with the primary purpose of providing accommodation to students undertaking tertiary education.
When should you book student accommodation in South Africa?
When can you apply for student accommodation? It varies from university to university, but usually you can applyonce you’ve accepted an offer. Some universities will allow you to apply for accommodation even if they’re your insurance option, although many will only open applications to you if they’re your firm choice.
What happens if I don’t pay student accommodation in South Africa?
Failure to paycould result in the landlord instructing bailiffs to obtain the value of the money judgment, and he warns, the judgment against them could affect their credit rating, which could affect their future financial plans, making it harder to get credit or loans.
Can you stay in student accommodation over summer in South Africa?
The simple answer is thatin most cases you most certainly can stay during the summer months. If you are renting private student accommodation then you definitely can stay during this season, because the contract will still be payable on a monthly basis. Landlords of course prefer to see income during this time.
