How to start a student accommodation business in South Africa

Renting out to students is one of the best ways to make money within the property business. It also guarantees a steady stream of income. This is a guide on how to start a student accommodation business in South Africa.

Overview

There are multiple tertiary institutions in South Africa, they draw out people from all corners of the country. Universities usually provide students with accommodation commonly known as “res”. However, these facilities can’t’ accommodate all students, some students need to rent somewhere else closer to the school.

This creates a demand for a student accommodation business whereby the entrepreneur buys a house and flips it into a student accommodation. Students are often more than willing to pay as most student accommodations are situated within a walking distance or just a few kilometres from the school.

The barriers to entry are a bit high and you need to have more than one student accommodation before you see significant returns. Student accommodations will always have tenants, even when the competition is tight.

Choose the right location

A student accommodation should not be far from the school that the students will be attending. Try your best to situate it within a few kilometres and 3 kilometres being the maximum. But it’s best to be within a walking distance of 15 minutes. Th closer you are; the better.

This will work for any medium to large tertiary institution; including TVET colleges, try to assess the demand first. Student accommodations are in high demand in places like Braamfontein where there are multiple tertiary institutions.

Buy rental property

The next step is to buy the house or apartment that you are going to use as a student accommodation. You have an option to lease it then rent it to students, collect the money from students, pay your lease and keep the difference. But you will be very limited in what you can do in someone else’s property.

Try to buy the property outright, whether through or mortgage or cash, it really doesn’t matter. What matters is that you eventually buy the property. Renovate it and turn it into a student accommodation.

You will have to get rid of rooms like dining rooms and lounges, there should only be one kitchen, bedrooms and a few bathrooms. Build extra rooms outside to maximize income.

Set up the student accommodation

All rooms should ideally have a single bed, or you can just let out rooms without any beds. Some people prefer sleeping on their own beds, there should be a study table on every room and WI-FI for everyone within your premises.

The issue of electricity is a bit tricky; you can include the cost of electricity in the rental fee then buy electricity for them or let them buy it for themselves. Buying electricity for them might lead to abuse, people will turn on the heater even when they don’t need it.

Choose a business model

You can either lease out directly to students or lease to tertiary institutions, which then give the rooms to students as res. The money is much higher when you are leasing to tertiary institutions, you get paid more per room, sometimes double what you would normally charge students.

Working with tertiary institutions right off the bat can be difficult, a safe starting point would be renting out directly to students.

Market your business

Marketing a student accommodation business is not difficult at all, this is because student accommodations are naturally in demand. All you have to do is make sure that everyone in your area is aware that you offer student accommodation, you will soon get a multitude of people looking for accommodation.

Conclusion

This was a guide on how to start a student accommodation business in South Africa. This can be a highly profitable business when managed well. Do you have any thoughts or questions? Comment below.

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