Patrick Nelson speaks on a panel in March at the Opal Financial Conference in New York City. On April 27, Nelson spoke at the Opal Group’s 2017 Real Estate Investors Conference in Boca Raton, Fl.
Nelson Brothers President and CEO Patrick Nelson spoke Thursday before many of the industry’s leading experts of managers, service providers, and institutional and private wealth investors at the Opal Group’s 2017 Real Estate Investors Conference in Boca Raton, Fl.
The two-day conference, held on April 26-27, exclusively featured dialogue-driven panel discussions led by consultants and family offices. The event also focused on the latest developments in the real estate marketplace, analyzing the opportunities and challenges in the real estate market ahead as well as examining best practices and exploring new deal strategies.
Nelson was a selected speaker and discussed “The Do’s and Don’ts of Student Housing,” offering a perspective on what to look for when building or investing in private student housing.
Student housing a hot market
While the private student housing sector is still considered a relatively new asset class, it has been rapidly gaining popularity as an investment vehicle due to its growth potential and comparatively high rates of return.
The New York Times reported in February that capitalization rates, or the rates of return on investment, in the student housing sector typically run one-half to three-quarters of a percentage point higher than with traditional multi-family properties.
Some of the sector’s fundamental math is even simpler to understand: Enrollment at college campuses has boomed over the past couple of decades, and investment in on-campus dorms hasn’t come close to meeting that demand. The constant influx of students provides a large, steady population of renters, and the high demand can help keep rental prices strong.
Nelson Brothers keys to success
But private student housing is also a specialized niche that requires its own expertise.
“It’s a totally different market from multi-family housing, from the way you manage it to the way you lease it to the way you deal with the kids,” Nelson told the conference attendees. “You really have to protect yourself from the kids. You’ve got to know what you’re doing and you’ve got to keep the perception of the property high.”
When asked about the company’s successful strategy of student housing investments since 2007, Nelson shared the following:
- Buying in the right locations. Nelson said proximity to campus is paramount, and illustrated that with the “10 to the hour” rule, meaning that students need to have a short walk to class.
- Being willing to buy something less than an “A” property. Nelson Brothers has had tremendous success buying “C-” or even “D+” properties and renovating them into “B” properties, which have provide a larger overall return on investment.
Ultimately, as the students themselves can appreciate, it’s about doing the homework.
“We look at every different school as a separate micro-economy, based on the elements of that market,” Nelson said. “Know your market. Know the university. What is the growth rate, what is the funding, what is the demand for the school. All of that stuff plays into it.”