Student Housing: The Hidden Gem of High Rental Yields

Most investors scroll past student housing listings. The mental image is too vivid: sticky floors, holes in drywall, tenants who vanish for three months each summer. But here's what they're missing: that same four-bedroom house near a state university can generate 40–60% more rent per square foot than a comparable family rental, delivering net yields that regularly hit 8–12% while traditional rentals struggle to break 5%. Student housing isn't a liability—it's a highly profitable niche hiding in plain sight, if you understand the rules of the game.

The Yield Gap: Why Student Housing Outperforms

Let's run the numbers. A 1,600 sq ft single-family home in a typical suburban market rents for $1,800/month. That same house, located within a mile of a 20,000-student campus, can be leased by the bedroom: four rooms at $650 each = $2,600/month—a 44% revenue premium. Even after accounting for higher turnover and utilities, the net yield often doubles.

The demand drivers are relentless:

• Enrollment growth: U.S. college enrollment has risen 16% in the last decade, while on-campus housing capacity grew only 8%.
• Price-insensitive parents: Mom and Dad often co-sign and pay, making rent collection more reliable than with traditional tenants.
• Location premium: Students will pay shamelessly for walkability. Proximity beats price every time.

This isn't theory. In markets like Austin, Columbus, and Gainesville, student rentals consistently achieve gross yields of 12–15%, compared to 7–9% for similar non-student properties.

The Rent-Per-Bedroom Model: Your Profit Multiplier

The magic happens when you stop thinking in units and start thinking in bedrooms. A three-bedroom house rented to a family for $2,000/month becomes a student rental at $750/bedroom = $2,250/month. But you can push further:

Shared common areas: Students accept smaller bedrooms if the living room is large and the kitchen is updated. They're buying the experience, not just space.
Furnished premiums: A $3,000 furniture package lets you charge $75–$100/month per bedroom more. That's $300–$400/month extra—$3,600–$4,800/year—paying back the furniture cost in under a year.
All-inclusive rent: Bundle utilities, internet, and laundry. Charge $850/bedroom instead of $750. At $100 × 4 bedrooms × 12 months = $4,800/year in markup, while actual utility costs run $3,200. Net gain: $1,600.

Example:

• Family Rental: $2,000/month × 12 = $24,000/year
• Student Rental: $850/bedroom × 4 × 12 = $40,800/year
• Delta: +$16,800 (70% revenue lift)

Even with a $2,000/year expense increase (higher turnover, utilities), you're still up $14,800—transforming a 5% yield property into a 9.5% yield machine.

Three Investment Archetypes: Choose Your Level

1. Individual Condo/Apartment (Entry Level)

Buy a 2-bed condo near campus, rent by the bedroom. Lower capital, easier financing, but you compete with every other mom-and-pop landlord.

Yields: 6–8% net

Best for: First-time investors testing the waters.

2. House in Multiple Occupation (HMO) (Sweet Spot) ⭐

A 4–6 bedroom house converted to student housing. This is where yields peak. You control the whole asset, and licensing barriers keep institutional investors out.

Yields: 9–12% net

Best for: Hands-on investors comfortable with intensity.

3. Purpose-Built Student Accommodation (PBSA) (Institutional)

Develop or buy a 50+ unit building with study rooms, gyms, and security. Requires massive capital and expertise, but yields are stable (7–9%) and management is outsourced.

Yields: 7–9% net

Best for: Syndicators or funds.

The HMO model is the hidden gem—big enough for serious profit, small enough to stay under the radar of REITs.

Pros and Cons: The Honest Truth

Pros:

✅ Recession-resistant: Enrollment actually rose during 2008–2010. When jobs disappear, people go back to school.
✅ Predictable cycle: You know exactly when leases start (August) and end (July). No mid-year surprises.
✅ Parental guarantees: 70% of student renters have co-signers. If junior doesn't pay, Dad's credit score takes the hit.
✅ Higher rent density: More rent per square foot than any other residential model.

Cons:

⚠️ Extreme seasonality: 90-day summer vacancy unless you offer short-term subleases or 12-month leases (harder to fill).
⚠️ Wear and tear: Plan for 1.5–2% of property value in maintenance, not 1%. Locks break, walls get scuffed, and "normal use" is a different concept.
⚠️ Management intensity: Students call about wifi, not just plumbing. Expect 30% more tenant communication.
⚠️ Regulatory risk: Some cities are cracking down on "mini-dorms" with occupancy limits and parking requirements.

The Non-Negotiables: What Makes or Breaks the Deal

Location: 0.5 Miles or Bust

Students don't drive. They walk, bike, or take a shuttle. If you're not within a 10-minute walk to campus or on a direct bus line, you're not student housing—you're just a regular rental with student tenants. Proximity trumps everything, including property condition.

Durability Over Design

Install commercial-grade laminate flooring, not hardwood. Use semi-gloss paint, not matte. Choose solid-core doors with deadbolts. Every finish should survive a frat party. Spending 20% more upfront on durability saves 50% in replacement costs over five years.

Furnish It (Strategically)

Students will pay for furnished units, but only if it's move-in ready. Include a bed, desk, dresser, and sofa. Skip the flat-screen TV (it'll break). The furniture package should cost no more than $1,000 per bedroom and be depreciated over 5 years. It's a profit center, not a cost.

Risk Management: Protecting Your High-Yield Asset

Parental Guarantees Are Mandatory

Every lease must have a co-signer with income ≥3x rent and a credit score >650. Run background checks on both student and parent. This single practice cuts non-payment risk by 80%.

12-Month Leases with Summer Sublease Clauses

Lock students into a full-year lease but allow them to sublet for summer. You collect rent in July and August while they find a summer intern to cover it. If they can't, the parent guarantee kicks in. You win either way.

Insurance Upgrade

Standard landlord policies don't cover student-density risks. Get a student housing endorsement that covers vandalism and higher occupancy. It costs 15–20% more but pays for itself if one party gets out of hand.

Real-World Case Study: From Family Home to Student Cash Cow

The Property:

A 1940s 4-bedroom house in Columbus, Ohio, 0.3 miles from Ohio State. Purchased for $280,000 in 2021.

Family Rental Scenario:

Would rent for $1,900/month → $22,800/year → 4.8% gross yield.

Student Housing Conversion:

• Renovation: $18,000 (added bedroom in finished basement, upgraded kitchen, commercial flooring)
• Furniture: $4,000
• Total Capital: $302,000

Income:

• Rent: $720/bedroom × 5 bedrooms × 12 months = $43,200
• Less: 8% vacancy (summer) = $3,456
• Effective Income: $39,744

Expenses:

• Management (10%): $3,974
• Taxes/Insurance: $4,200
• Utilities (included): $3,600
• Maintenance/CapEx (2% of value): $6,040
• Total Expenses: $17,814

Net Cash Flow: $21,930

Net Yield: 7.3% (on $302k)

Outcome:

The investor nets $21,930/year instead of the $8,000 they'd have made as a family rental—a 174% improvement. After three years, they refinanced, pulled out $60,000, and bought a second property.

Who Should Invest in Student Housing?

This isn't a passive strategy. It suits:

Local investors who can drive by weekly.
Parents of college students who can self-manage and house their own kid.
Hands-on operators who enjoy (or can tolerate) high-touch management.

If you want mailbox money, buy a NNN Starbucks. If you want high yield and are willing to work for it, student housing is your arena.

Final Word: The Misunderstood Goldmine

Student housing isn't for the faint of heart, but the yield gap is real and persistent. Institutions are buying up PBSA, but the sweet spot—5–8 bedroom houses near major universities—remains fragmented and inefficient. That's where you profit. The key is to stop seeing students as risky tenants and start seeing them as price-insensitive, parent-backed renters who value location over luxury and convenience over cost.

The next time you drive past a campus and see packed apartment buildings, don't see chaos. See cash flow waiting to be captured.

Action Step:

Identify the three largest universities within a two-hour drive of you. Pull up Zillow listings within a 0.5-mile radius. Run the rent-per-bedroom math. One of those properties is your next 10% yield deal. Go find it.

Use our rental yield calculator to model student housing scenarios and compare them to traditional rentals.