Student Housing Investing Explained: Why Student Housing Outperforms Multifamily

Zach Feldman (00:00)
So I guess I might have a different view on how to get into the student housing space. One of the things I always recommend is if you haven’t done student housing or haven’t really invested in real estate at scale, I highly recommend being an LP or try to be a co GP or a JV with a seasoned operator, if you will. You know, I people who come up to me all the time and say, want to invest in apartments or I want to do a condo dealer or I want to do student housing. And I openly say like, you know,

Dylan Silver (01:58)
Hey folks, welcome back to the show. Today’s guest, Zach Feldman is a partner at Aptitude Development, one of the nation’s top student housing firms with 5,000 plus beds and another quarter billion dollars of student housing under construction. Prior to joining Aptitude, Zach launched Enjoy 77 Holdings, which specializes in student housing, multifamily, as well as tech and solar development fields. Welcome to the show, Zach.

Zach Feldman (02:21)
Yes, we have me.

Dylan Silver (02:22)
Now student housing is an area I mentioned in the green room. A lot of people are interested in and it’s one of these segments of real estate where it does seem to be maybe a slightly higher degree of complexity. For folks who may be looking at getting into the space at a base level, where should they start?

Zach Feldman (02:40)
So I guess I might have a different view on how to get into the student housing space. One of the things I always recommend is if you haven’t done student housing or haven’t really invested in real estate at scale, I highly recommend being an LP or try to be a co GP or a JV with a seasoned operator, if you will. You know, I people who come up to me all the time and say, want to invest in apartments or I want to do a condo dealer or I want to do student housing. And I openly say like, you know,

talk to someone in our investor relations department, think about being an LP. It’s a lot of brain damage. And I think one of the biggest myths I’ve heard in the last 10, 15 years is that real estate is passive. It’s not passive, right? It’s passive if you’re an LP. It’s passive if you want to let your buildings go to shit and have property management companies kind of not take care of you. It’s not passive, right? And I think people that have the best returns are really deep in the weeds and understand their business from A to Z.

App2Development is a vertically integrated student housing developer. So we will go find the market we like. We will go tie up the land. We will go entitle the land. We’ll design the building, find a contractor to go build it. We’ll build the project. We’ll manage the project and we’ll operate the project and we’ll typically exit anywhere from three to five years on a total hold period. But if you don’t understand all of that, right? The nuances of leasing by the bed of marketing via not only social media, but going on campus and you

handing out flyers and sponsoring bar nights and sponsoring Greek row and things like that. You you start building the brand really early on to lease up, you know, quite attractively. You know, I would say every single one of our deliveries besides maybe one has leased up to 99 plus percent the day we open. And that might be one of the main differences people don’t realize is, you know, in multifamily or apartments, if you deliver, you start kind of leasing up 60 days before you deliver.

Dylan Silver (04:24)
Yeah.

Zach Feldman (04:28)
Student housing, we start leasing a year before the building delivers. So let’s say we’re going to deliver June of 2026. We started leasing the building in June of 2025 with a full sales office that’s more comparable to like a condo gallery, right? And we’ll literally start building the brand and building momentum that when we open in June, if we do our job right, we literally have a hundred percent, you know, revenue and a hundred percent collections on the day one, the building opens. There’s not like a two year lease up period on the backend. So.

Dylan Silver (04:57)
I’ve heard

some people say, specifically in the multifamily space, that deals aren’t penciling. What’s the difference in student housing?

Zach Feldman (05:53)
Yeah, so listen, there’s certain deals that don’t pencil in student as well, right? But I think ⁓ there’s also deals that do pencil multifamily, right? So it’s obviously location specific where you want to be. ⁓ We used to look at maybe 250 markets around the country in the student housing side. We now look at about 25 to 30, right? So it’s much more kind of target specific. I would say the differentiator is if you’re a developer in Austin, Texas, and that market’s really not kind of getting any equity or debt on the development side.

to go try and become an expert in Manhattan real estate on the multifamily side, probably not something you want to go look down the barrel on, right? It’s quite a different animal. But on the student side, you can kind of figure out a college market relatively quickly. If a campus is a square, the bars are on kind of the north strip, if you will, and there’s a pocket of high rents right around there, and the business school is up there as well, and that’s where a lot of their enrollment comes from. You can say, hey, if I’m within a couple hundred feet,

I’ll probably be okay. Whereas trying to understand neighborhoods is much more difficult. And in the student housing side, it’s almost like you add a location under the classic saying of location, location, location. If you’re on the wrong side of campus, you’re gonna get killed, but it’s pretty easy to figure that out in a relatively quick manner. You can become an expert in what’s called the market, I think a lot quicker than you can in multifamily. And also in multifamily, if you go a quarter mile down the road,

You know, it might not be that big of a deal for someone renting if the apartment is just as nice and it’s a little bit cheaper, there’s more concessions. On student, if you go a quarter mile down the road, you might be too far away of a walk from your classes or from the social life that you really don’t want to be there. So your infill locations, I think, are even more important in the student housing space.

Dylan Silver (07:36)
In student housing, are investors allowed to exclusively allow students in their marketing as well as their tenant pool or do they have to open it up to really anybody who wants to live there?

Zach Feldman (07:51)
It’s a great question. think across the industry is like 2 to 5 % of renters are actually not students. But because of fair housing, you can’t discriminate, which is fine, right? It’s totally something we abide by and we agree with. If you want to live in a building and you qualify, you should be able to live there. The flip side is if most people that come in with like a wife and a kid look around, they’re like, wow, it’s all themed with the school or there’s a bunch of kids 18 to 22 running around and we don’t really want to be around that. It dissuades them from living there.

But, you know, they’re certainly allowed to if they want to, but being, you know, across the street from the biggest bar in a college town is typically not attractive for, you know, young professional or family, but it’s very attractive for someone in, you know, that attends a university. You also, you know, would say market it as luxury student living or, you know, purpose-built student housing. So the clientele you typically attract is the student space. The other part of that in the student space is you typically rent by the bed.

and they’re fully furnished. if Zach, Dylan and Joe are best friends freshman year, and we live on campus and we want to move off campus our sophomore year, we might live in unit 101. And I might have bedroom A on my lease, you might have bedroom B, and he might have bedroom C. And all you have to do is when you show up is have a backpack and linens. And there’s a bed, there’s a dresser, there’s a couch in the living room, there’s a TV with internet service already fully wired throughout the building. All you got to do is show up with your books and some sheets and you’re ready to go.

So we make it a really easy experience for not only you, but as a parent, they don’t have to go shopping for furniture. It’s a really great user experience compared to, I think, other alternatives that might be older apartment houses or single-family homes adjacent to colleges.

Dylan Silver (09:29)
I’ve seen that there’d be a lot of interest from syndicators and multifamily throughout the country, but I haven’t seen as much interest in the student housing space. Is that true or are there a lot of syndicators now looking into student housing?

Zach Feldman (09:44)
So I’ll kind of go back and tie in your earlier question a little bit too. people like student housing and why they pencil today is because in the right markets your yield on college is going to be a premium to multifamily, but your exit cap should still be quite attractive. So I’ll give you a good example. In certain markets and not all the markets, right? It’s not this isn’t not not all them are in the same, but I would call it in the investable markets. Your effective rent per foot is a massive premium over your.

multifamily in the area. So think about it this way, the four beds in the market or anywhere on the new construction in what’s called a good market could be 12 to $1400 a kid. Okay, so if you, me, Joe and Jim all rent our four bedroom, could be call it 1200 bucks a person, right? And a 1200 to 1400 square foot total unit, right? So they’re getting a large rent close to 4800 bucks a month on that unit. And the way to monetize

the actual rentable square footage compared to multifamily, right? 1200 square feet might be a two bedroom. You know, maybe it’s a three bedroom in certain markets, but multifamily, you don’t really build three bedrooms. So like in the top student housing markets in Class A construction, you’re getting like five, six, seven bucks a foot on your effective rent, which is like insane. Whereas the multifamily, you know, a mile away, which could also be Class A new, maybe you’re getting 250, maybe three bucks in certain markets, right? Like,

Dylan Silver (11:34)
Yeah.

Zach Feldman (11:43)
You’re not really cracking that number unless you’re in a major, major Metro in a great area and you build for the multifamily space. Where if I’m in Tempe, Arizona or Chapel Hill, North Carolina or Ann Arbor, Michigan, right? These are really strong markets with really strong rents. Your effective rent per foot in your yield on cost is going to be such a premium over multifamily. It’s a really effective asset class. Moving that one step further, when you talk about syndicators or LPs or even institutional LPs.

Right? Their delinquency is very, very low because mom and dad are guaranteeing the rent. And if you’re in the right location and you build it right at the right school, your occupancy is going to be incredibly high. You should have strong rent growth and you have relatively high barriers to entry because it’s hard to assemble enough land and kind of build it the right

Dylan Silver (12:25)
Now, for folks who are looking at developing in this space, it’s not just a matter of development, right? You’re also having to have a full marketing effort, because as you mentioned, you could develop the project, but you’re now leasing it up a year prior to it being completely finished, right? So when folks are getting into that space, they have to have that component of it already lined up. You can’t just look at this as,

A multifamily

Zach Feldman (12:54)
Yeah.

Dylan Silver (12:55)
deal with that we’re going to have the students, you got to have a full marketing arm ready to go.

Zach Feldman (13:00)
A lot of real estate syndicators, I say a lot, but enough of them started poking around and trying to do one-off projects during COVID when it got too competitive to do the multifamily kind of product type. And they’re not doing more deals. And I think because it’s such a specialized product, if you don’t know how to lease, your turnover is like probably two or three times as much as it is compared to the multifamily space where you almost have 50, 60, 70 % turnover every single year versus 60, 70 % renewals every single year.

in the multifamily space and then you look at like BTR is even higher than BTR the average renter stays for like three to four years. Student, you your renter stays like a year and a half, I think on average, maybe two if it’s a really good building. So you’re constantly releasing the building and releasing the building. The benefit of that is you can actually, if it’s a good market, get larger rent increases and you can kind of affect that across a full rent roll versus saying, hey, if we have 30 % turnover a year in a hot market, it’s gonna be really hard to get like that actual top line growth.

you can get that quicker in a student, but it’s a huge marketing effort every year. You your staffing on these buildings can be four to $600,000 a year compared to maybe two to three staff, best case in multifamily. I mean, a lot of them are doing virtual tours and kind of unaccompanied tours now and getting rid of leasing staff. ⁓ So it’s very hands on.

Dylan Silver (14:15)
Now, if these folks are staying there for a year, year and a half, and then they’re constantly finding new tenants, right? If the greater multifamily market may be experiencing decreased rents, could a strong student housing firm and property managers fight against that and potentially still increase rents during that? Or are they going to be greatly impacted by deflationary rents as well?

Zach Feldman (14:28)
Mm-hmm.

Are you asking if student housing is affected by multifamily markets? Yeah, I mean, for sure, right? So at a certain point, if like the, and the rent growth in student has been quite pronounced in the last couple of years, it kind of was like a year or two lagging the multifamily craze during COVID. And you saw some really strong rent growth, but this kind of goes back to the original thought of like in the right markets with the right locations and the right product, you’re to get rent growth. And

Dylan Silver (14:49)
Yeah.

Zach Feldman (15:10)
That’s just becoming, you know, the buildings become a brand. If you’re like, you know, our brand is called the Marshall. If you’re across from like the bars and in a great location and you build a great product, when you’re a freshman, the first time you go to a cool party, it’s at the Marshall or pregame or, you know, people in your sorority or fraternity or sports teams live there. That kind of becomes like the cool building. You know, we have a building in South Carolina at Coastal that is called the Pier and that’s become kind of like the cool off-campus building for lack of a better term.

And it almost runs itself where people are like, my friend lived there. It’s great. And it kind of, you know, same thing. You know, when I went to college, we had these off-campus houses that had names and they kind of got passed down, if you will. Right. And that certainly happens at larger buildings where, my sister lived at this building and I wanted to live there when I went to school and it was a really cool building. So you’re more insulated to a degree, but then at a certain point, if your rent growth gets too, too kind of aggressive, it’s hard not to go look at multifamily. That’s a short drive away and say,

Dylan Silver (15:40)
Yeah, that’s amazing.

Zach Feldman (16:49)
Hey, it’s just beautiful building, you know, 10 minutes away and the rent significantly cheaper. And when I was getting in a four bedroom, I can get in a two bedroom, things like that. But most college towns you have to think about don’t have a ton of multifamily that compete. Not all like we have a building in Tempe that the multifamily market is something you have to be cognizant of. But in Ann Arbor, Michigan or Tuscaloosa, Alabama, Auburn, Alabama, some of these large state institutions that are kind of their own cities within themselves.

you know, it’s not a huge impact.

Dylan Silver (17:18)
I’ve heard multifamily investors say they’re having to look at longer time horizons because maybe they got burned a little bit over the last couple of years. And so instead of three to five years, they may be having a look at seven to 10. In student housing, are you seeing anything similar?

Zach Feldman (17:37)
Yes and no. We look at our hold periods as being somewhat opportunistic if we think there’s a lot of rent growth because enrollment’s going up and there’s not a lot of new builds or you have a city council that’s anti-development so you think you’ve kind of pulled the ladder up behind you a little bit. Then yeah, you should get the rent growth and extend that for the right reason. think in the multifamily side, you’re seeing people that are essentially upside down on their deals, whether it be the debt and equity proportion.

and they’re hoping to have the market stabilize and exit in. I mean, I know you mentioned you’re in Texas, right? If you’re in Austin right now and you underwrote to X rents and occupancy across the market’s 15, 20 % down, and there’s no rent growth, rent’s continuing to go down and there’s two to three months of concessions. I’ve heard rumors in Charlotte that they’re even offering two, three months of concessions on renewals. Your best hope is that.

the market stabilizes and in seven to 10 years you can make par, right? I openly said if I could short some of these buildings in these markets, I would, because I don’t think, I think the equities wiped out 100 % in a large majority of these summed up markets. There’s still cranes in the air, right? Supplies still coming in and you’re offering three months, and it doesn’t seem like there’s any barriers to entry in those markets. If I’m gonna go already be 15, 20 minutes outside of downtown Charlotte, could go be.

20 to 25 and have a beautiful apartment debt or a beautiful townhouse that’s comparable price from being three months free. I don’t know if I really care and it just continues to go. And I know they add, you know, 100 people a day or whatever the statistic is, but like, that’s not 50,000 people a month, right? Like there’s so much supply out there. I think that’s, you got to look at the incentive behind that hat. Why would someone that either on a development or on a value add deal wants to push out the exit hold? It’s because they don’t want to.

Dylan Silver (18:59)
Yeah.

Zach Feldman (19:19)
either be underwater on their PG and they want to return some type of capital. And if they say, hey, we’re screwed, we’re going to sell in year three or five, my promotion going, your equity is going to be wiped out. They’re never going to raise money again. It’s a very difficult position for them to be in. But again, you know, I don’t think it’s an unreasonable thing to say, hey, let’s operate it well. Let’s you know, we built great product or we own great product. It’s you know, we just got to kind of battle through it and they’ll probably be okay in the right markets. But

That to me seems like probably the real reasoning and mindset behind it.

Dylan Silver (19:49)
There’s, think, a lot of people who are seeing this thing going on in markets like the greater Austin market where folks are potentially getting two months free rent plus incentives, Amazon gift card, Visa gift card, and they’re saying, where was that seven to 10 years ago? I mean, I think about…

Zach Feldman (20:05)
Yeah.

Dylan Silver (20:09)
what some people are paying to move into some apartments and it might be like four to five times the rent and now they’re getting two months free plus concessions. It’s pretty remarkable. We are coming up on time here, Zach. It is March, March 23rd when we’re talking today. We’re in the middle of March madness. Any picks or how’s your bracket looking?

Zach Feldman (20:25)
Yeah.

You know what, I have no picks. I don’t give out any gambling advice on the internet for sure. I don’t pretend to be an expert in that. But it is funny. You’ll see on the student housing side, and my partner Jared wrote something about this recently, that these schools that have your of miracle moments, They kind of get on your radar and you say, do they have a pop-in enrollment or things like that? Not so much your high points of the world or your kind of Cinderella stories, but you

when Texas or Indiana won a national championship or when you have Alabama that goes and wins every four or five years or Georgia that made a big run like application search, right? It just became, it’s great brand recognition. you know, I don’t know if you know Joe Pompuliano, he runs like a monthly newsletter or weekly newsletter on kind of the business of sports. You know, he did a really great deep dive on Miami and Indiana and how getting the Indiana coach was incredibly expensive, but like that brand recognition, the booster dollars they can raise for the school, the enrollment that you expect to come from that.

you can’t put a value on it, right? These large institutions have become asset management businesses. know, Vanderbilt’s opening a half a billion dollar campus in Palm beach. I don’t know if that really furthers their kind of directive to educate individuals. I think it’s become more of an asset management business. So if you can go deep in college basketball and you have a large football program, the bigger getting bigger and your small kind of schools that don’t create much value on the backend are going out of business. You’re seeing this all the time. So

If your big schools do well and they win every single year, it’s good for business.

Dylan Silver (21:55)
Now, I know that you’re involved in a lot of new projects. Anything new that you’d like to get out to our audience and then as well, what’s the best way for folks to reach out to your team?

Zach Feldman (22:05)
Yeah, I I openly give out my email. You can put it in the show notes if you want it to [email protected] We love the student housing business. We have two projects that are going to break ground later this year. The next one up is NC State in Raleigh, North Carolina. So if anyone’s interested in learning more about the business, wants to just chat, you know, market student housing or wants to learn more about NC State, they’re more than, you know, more than happy to reach out and talk about it.

Dylan Silver (22:29)
Zach, thanks for taking the time today. Thanks for joining us.

Zach Feldman (22:31)
Awesome.

Thanks, Dylan Bye.