Sponsored: Student Housing – A Potentially IDEAL Investment

March 10, 2020

By: Brian Nelson, President of NB Private Capital

Is there a perfect investment? With the vacancy rate of student housing units at a low 2.6 percent in the U.S, student housing seems to come pretty close! While no investment opportunity is actually perfect, NB Private Capital has found that student housing displays some “IDEAL” potential benefits for investors:

I: Income
D: Depreciation
E: Equity Growth
A: Appreciation
L: Lifetime

Here’s what we strive to achieve:

Income

One concern many new investors express is their worry that their investments won’t generate reliable income. Student housing investments target that very objective. Major universities act as an anchor, consistently drawing in a steady stream of students—or tenants, from an investor’s point of view. By investing in the high-occupancy properties around major universities, NB Private Capital has historically seen a reliable cash flow year after year on most of our properties, which has translated into consistent income for investors in those properties.

Unlike a typical real estate investment trust, which would pay dividends quarterly, NB Private Capital strives to pay its investors monthly.

“Most of our properties procure a monthly income that we pay out to investors on the 15th of every month,” says Brian Nelson, president of NB Private Capital.

Depreciation

Twenty-seven years and six months: that’s how long the IRS says is the “useful life” of a rental property. Over these 27.5 years, depreciation allows investors to spread out the cost of buying the property. This often makes student housing property a more comfortable choice for investors.

Additionally, Investopedia notes, because payments are spread out, depreciation also reduces each year’s tax obligation. The IRS’s depreciation schedule may shield up to 70 percent of one’s student housing investment income from taxes.

“One of the advantages of owning a brick-and-mortar building is that we’re able to write off the wear and tear and usage of the building and use that loss to shelter a lot of the income from taxes,” Nelson says. “So it’s just a great way to enhance the net cash that you are receiving.”

Equity Growth

Heard of amortization? If you’ve ever had a mortgage, you’ve probably encountered this equity-growing process.

“Amortization is the process of spreading out a loan into a series of fixed payments over time,” according to The Balance. “You’ll be paying off the loan’s interest and principal in different amounts each month, although your total payment remains equal each period.”

“For a lot of our properties, every month we’re not just paying off the mortgage but we’re also paying down the loan principal,” Nelson says. “So it’s just another way to organically use cash flow from the operation to organically pay off the equity of the property.”

This is good news for those invested in student housing properties. While the tenants essentially pay off the loan, the investor’s equity in the property grows.

Appreciation

Appreciation is something all investors seek out, and student housing has the potential to be a good pick for this. Historically, student housing properties have appreciated faster than the rate of inflation. And some investors are content to leave it at that.

But “we’re not going to buy a property without some sort of strategy designed to grow the value of the property,” Nelson says. “When we sell it, whether it’s three years, four years, or five years down the road, we want your value to appreciate and grow over time.”

That strategy can include doing things that accelerate the rate of appreciation. NB Private Capital, for example, has an in-house design and construction team to take care of remodeling or renovation. Having these teams in-house allows the company to work to increase the value of properties without having to spend unreasonable amounts.

Additionally, investors have the potential to accelerate appreciation by doing their due diligence from the very beginning. At NB Private Capital, we seek out properties that we believe are:

In great areas
Reasonably priced
Located in strong rental markets.

Student housing has the ability to hit the mark on all three of these items.

Lifetime

With any successful real estate investment, capital gains taxes are always looming in the distant future. But if investors make the right strategic decisions, they have the potential to avoid those taxes over a lifetime.

“What makes real estate so unique is that we have the ability to do a 1031 Exchange,” Nelson says. “It’s one of the only places outside of an IRA where you can defer capital gains taxes and even depreciation-recapture taxes indefinitely.”

“That’s what the L in Lifetime stands for: using the 1031 Exchange to target keeping that money working and growing for you, rather than writing off a big check to Uncle Sam every time you realize a capital gain,” Nelson says.

There are no perfect investments, but we believe student housing has the potential to be “IDEAL.” Student housing investors have the opportunity to generate income, take advantage of depreciation, grow their equity, accelerate appreciation, and defer taxes over a lifetime. This investment has the potential to be an excellent addition to your financial strategy.

Not an offer/solicitation to sell/buy securities. Securities offered through Emerson Equity LLC, member FINRA/SIPC, only in states where Emerson is registered or exempt from registration. All investing involves risk. Speak to your financial professional before investing. Past performance is not indicative of future results. Emerson is not affiliated with any other entity in this communication.

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Brian Nelson, Founder and President of NB Private Capital

In April 2018, Brian Nelson founded NB Private Capital, a student housing investment company that focuses on securing properties that have stable occupancy near the historical dependability of a university. The goal of NB Private Capital is to leverage Brian’s extensive experience in student housing to create a more investor-centric firm that places greater emphasis on property performance, investor communication, and long-term relationships.

In its inaugural year, NB Private Capital acquired greater than $200 million in student housing assets while averaging a 97 percent occupancy on all DST assets. NB Private Capital was one of the first to introduce a 24/7 accessible investment app and monthly reporting.

Brian’s extensive experience started in 2007 when he co-founded Nelson Brothers Professional Real Estate (NBPRE). Brian led the sales and marketing efforts at NBPRE. Despite starting a firm with a minimal track record, minimal investor base, few resources and only four employees at the beginning of a deep recession, Brian helped build NBPRE into one of the 20 largest student housing ownership groups in the country, closing over $1 billion in assets with over 1800 clients, and building the firm to over 200 employees. In 2017, Nelson Brothers was recognized by Inc. 500 as the 129th fastest growing company in the U.S. and the 4th fastest growing in the real estate industry.

In 2011, Brian authored “13 Keys” to effective, long-term student housing acquisition. The “keys” serve NB Private Capital as a disciplined buying model targeting low-expense, tax shelter friendly assets believed to be well-positioned within walking distance to growing universities with substantive barriers to entry.

Inspired by Brian’s acquisition model, NB Private Capital and NBPRE have gone full cycle on projects involving ten student housing properties with an average total return exceeding 50 percent.

Brian worked as a product marketing manager for VERITAS and Symantec Software (NASDAQ:SYMC) where he specialized in marketing strategy, business development, and product positioning for several software products totaling well over $50 million in annual sales. He has a Bachelor of Arts from the University of Utah and a Master of Business Administration from Brigham Young University. He holds Series 7 and 63 registrations.

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NB Private Capital is a sponsor of The DI Wire, and the article was published as part of their standard directory sponsorship package.

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