Student housing is a hot product for investors
Student housing - rental properties located in or close to colleges and universities - has long been particularly popular with investors. This year it's becoming even more popular.
Buyers include individual students or their families, or large institutional investors who acquire many similar properties. A report on this trend was recently posted by the National Association of Realtors:
"Investors are snatching up more student housing properties than ever before. Indeed, 'Last year was the biggest year ever, investment sales-wise,' Fred Pierce, president and CEO of Pierce Educational Properties, told the National Real Estate Investor. But this year is on pace to be even bigger.
"Investors have purchased more than $3 billion in student housing properties from the start of 2016 through mid-May. That is up from $2.1 billion over the same time period in 2015."
The report pointed out the extent of the current trend.
"Interest in the student housing sector is as high as it's ever been and is increasing," says Doug Opalka, senior managing director for Holliday Fenoglio Fowler.
"One giant deal recently is coming from a partnership of institutional investors - including the Canada Pension Plan Investment Board, GIC and The Scion Group - which is about to close a $1.4 billion deal to buy University House Communities Group Inc. The company owns 13,000 student housing beds.
"That is going to create additional investment sales," says Pierce, adding that big portfolio sales often lead to spinoff transactions.
"Student housing is typically viewed by investors as a stable investment with consistent yields and a sector that tends to be more resistant to any economic downfalls, the National Real Estate Investor reports on the draw."
Q. How have home mortgage loans changed in recent years?
A. A study on this subject was made by Zillow Real Estate. Among the key changes they found were as follows:
• Borrowers with low credit scores have virtually disappeared from the market for conventional loans, while those with moderate credit have made a comeback in recent years.
• Condos now make up almost half of new conventional mortgages, and this share is increasing every year.
• During the bubble, some high-credit borrowers used multiple loans to afford more expensive homes, but today the vast majority of homebuyers take out a single mortgage.
Q. What are the downsides of contracting for a reverse mortgage?
A. Its high cost is probably the major downside. After adding all the upfront fees, the cost is usually considerably more than a traditional mortgage.
As home equity is used, fewer assets are available to leave to your heirs. You can still leave the home to your heirs, but they will have to repay the loan balance.
Eligibility for needs-based government programs, such as Medicaid or Supplemental Security Income, may be affected. Consult a benefits specialist.
There you have a few negative points. To learn the positives, view the many commercials on TV sponsored by lenders who are trying to promote sales.
Q. What kind of returns are real estate investment trusts, or REITs, showing?
A. They are doing quite well. Here's the most recent report from the National Association of Real Estate Investment Trusts:
"Stock exchange-listed U.S. REITs delivered total returns more than double those of the broader equity market in the year through July. For the first seven months of the year, the NAREIT All REITs Index, the broadest benchmark of the listed U.S. REIT industry that contains both equity and mortgage REITs, delivered an 18.05 percent total return."
Q. Are mortgage rates still declining?
A. Yes, at this writing those rates are again dropping a bit. Freddie Mac released the results of its Primary Mortgage Market Survey, showing average fixed mortgage rates moving slightly lower from the previous week, remaining near their record lows.
The 30-year fixed-rate mortgage averaged 3.43 percent with an average 0.5 point for the week ending Aug. 18, down from the previous week when it averaged 3.45 percent. A year ago at this time, the 30-year FRM averaged 3.93 percent.
The 15-year FRM that week averaged 2.74 percent with an average 0.5 point, down from the prior week when it averaged 2.76 percent. A year ago at this time, the 15-year FRM averaged 3.15 percent.
• Email Jim Woodard at storyjim@aol.com.
© 2016, Creators Syndicate