Student housing looks straightforward on the surface. Students need housing, parents help pay the rent, and properties near campus tend to stay full.
But the operating environment has changed, and owners who built strong portfolios over the last decade are now reassessing whether those properties still meet their financial goals.
Insurance premiums are climbing quickly. Rent control limits annual increases. Repair costs have risen sharply. At the same time, new inventory near the University of Oregon is reshaping competition. Investors who stay ahead of those shifts preserve equity, while those who wait often lose flexibility.
David Moore of Equity Advantage and Renee Nelson of PacWest Commercial have worked through enough market cycles to recognize when conditions tighten. In this environment, structure and planning matter more than ever, especially when a 1031 Exchange is part of the strategy.
Insurance Is Driving More Decisions Than Owners Expect
Insurance has moved from a background expense to a central factor in whether transactions even close.
Carriers now review construction dates, require electrical inspections, and use drones and online imagery to inspect roofs. If they identify outdated panels, standing water on flat roofs, or aging plumbing systems, they often require upgrades before issuing coverage, and in some cases buyers cannot secure insurance at all.
One Eugene owner spent $45,000 replacing electrical panels to satisfy his carrier, and even after completing the work his annual premium rose from $3,000 to $8,600. That kind of increase immediately changes cash flow projections.
Oregon limits annual rent increases to 9.5 percent, so when insurance jumps 20 percent or more, income does not keep pace with expenses and owners begin to feel the squeeze quickly.
Lenders will not tolerate gaps in coverage, which means that if a borrower cannot secure insurance, the lender force-places a policy, often at an even higher cost. As a result, self-insuring is rarely realistic unless the property is owned free and clear.
Before buying or selling student housing, investors need to evaluate insurance underwriting alongside rents and vacancy, because waiting until escrow is nearly complete can jeopardize the entire transaction.
Rent Control and Lease Structure Shape Performance
Rent control changes the math, and many investors underestimate how it affects underwriting.
In traditional market-rate housing, tenants often sign a one-year lease and then convert to month-to-month status. Once that happens, additional landlord-tenant protections apply, which can limit how and when an owner adjusts rents or repositions units.
Student housing operates differently. Most professional managers use 11-month leases tied to the academic calendar. That structure gives owners a defined renovation window each year and prevents automatic conversion to month-to-month tenancy. It creates more predictability in turnover.
However, rent caps still apply. Even with clean annual turnover, owners cannot raise rents beyond the allowable limit, and that constraint directly affects how buyers evaluate value.
Investors are no longer purchasing based on aggressive rent projections. Instead of assuming they can raise rents dramatically after closing, they focus on in-place income, stabilized expenses, and what the property can legally support under current regulations.
One out-of-state student housing group learned that lesson firsthand. After purchasing a property near the University of Oregon, they paid relocation costs, completed renovations, and pushed rents sharply higher. The market did not absorb the increase as expected, units remained vacant longer, rents were adjusted downward, and projected returns did not materialize as planned.
In a regulated market, the numbers have to work as they sit, not as investors wish they would.
Location and Pre-Leasing Tell the Real Story
In student housing, location continues to shape long-term performance, especially as new inventory comes online and competition increases.
Investors who plan to hold over time often perform better when they prioritize walkability to the University of Oregon, even if that means purchasing fewer units. A smaller asset in a stronger micro-market can outperform a larger property located farther away because proximity supports consistent demand.
Students consistently look for access to nightlife, grocery stores, and bus lines, and those features directly influence both rent levels and leasing velocity.
While vacancy rates provide a snapshot of current performance, pre-leasing activity reveals where a property is heading. Institutional towers have experienced significant vacancy swings in recent cycles, and properties farther from campus tend to feel pressure first when new inventory enters the market.
As additional units deliver in 2027, properties located 10 to 12 minutes from campus may experience softer rents compared to walkable assets, which means owners should underwrite conservatively and account for that possibility before committing capital.
Rising Expenses Are Reshaping Returns
At the same time that rent growth is capped, operating costs have increased across the board, which directly affects long-term returns.
Maintenance and repair budgets that averaged roughly $800 per unit several years ago now approach $1,500 in many cases, as materials cost more, labor rates rise, and insurance carriers require upgrades that were once optional.
Many long-time owners built their portfolios through sweat equity. They painted units, handled turnovers, managed tenants directly, and steadily built meaningful equity over time.
Now those same owners face higher insurance premiums, mandated upgrades, and tighter regulatory controls, so while the property may still generate income, the effort required to maintain it often no longer aligns with their stage of life.
At that point, holding becomes a strategic choice rather than an automatic decision.
Using a 1031 Exchange as a Strategic Tool
When an owner reaches that decision point, the 1031 Exchange becomes a practical tool for preserving flexibility and protecting accumulated equity.
A properly structured 1031 Exchange allows an investor to defer capital gains tax and reposition equity into assets that better align with current objectives. Some investors transition from multifamily into commercial properties to reduce direct tenant management and regulatory exposure, while others simply want a more predictable income structure.
Because timing and structure matter, planning has to occur before closing.
Seller carry financing can work within a 1031 Exchange if handled correctly, and in situations where financing or insurance delays threaten closing, a short-term note can preserve equity and allow permanent financing to follow. Without planning, those same circumstances can derail the Exchange entirely.
Investors should coordinate their Exchange strategy before closing, since relying solely on boilerplate contract language does not guarantee proper structure. Once a transaction closes without the Exchange in place, the opportunity to defer tax disappears.
Experience matters in this environment. The Exchange fee is typically minor compared to the overall transaction, but the financial impact of a structural mistake can be significant.
Aligning Property With Long-Term Objectives
Student housing can still perform well when underwriting is disciplined, location is strong, and expense assumptions are realistic. For some investors, improving and holding remains the right move. For others, redeploying equity into a different asset class reduces complexity and creates greater financial flexibility.
The decision begins with understanding current value, actual net operating income, and projected tax exposure. From there, investors can evaluate whether to refinance, renovate, hold, or complete a 1031 Exchange based on clear numbers rather than frustration.
If insurance costs, rent caps, and rising expenses are reducing your returns, take the time to evaluate your options before the next renewal notice arrives. Contact Equity Advantage today to speak with an Exchange expert and build a strategy that protects your equity and positions you for the next cycle.
The Guys With All The Answers…
David and Thomas Moore, the co-founders of Equity Advantage & IRA Advantage
Whether working through a 1031 Exchange with Equity Advantage, acquiring real estate with an IRA through IRA Advantage or listing investment property through our Post 1031 property listing site, we are here to help Investors get where they want to be. Call them today! 503-635-1031.
FAQs About Student Housing Investments and 1031 Exchanges:
How does rent control affect student housing investments?
Oregon limits annual rent increases to 9.5 percent, which directly impacts how investors underwrite deals. Even though many student housing properties use 11-month leases tied to the academic calendar, rent caps still apply. That means buyers must base decisions on in-place income and realistic expense projections rather than assuming they can raise rents aggressively after closing.
Why is insurance becoming a major issue for student housing owners?
Insurance carriers are reviewing construction dates, requiring electrical inspections, and using drones and online imagery to evaluate roofs. If they identify outdated panels, aging plumbing, or roof concerns, they may require upgrades before issuing coverage. Premiums have also increased significantly in some cases, and lenders require insurance coverage, which can force higher costs and impact cash flow.
When does a 1031 Exchange make sense for student housing owners?
A 1031 Exchange can make sense when rising insurance costs, rent caps, and operating expenses reduce returns or no longer align with an owner’s long-term goals. A properly structured 1031 Exchange allows investors to defer capital gains tax and reposition equity into assets that better match their objectives, including commercial properties that may involve less direct tenant management.
