Location is a very important consideration when investing in real estate. Having condos, apartments or single family homes in the right neighborhood means good rental income and continual property appreciation. Some of the best cities to buy rental property in 2019 are actually college towns. While some investors shun such locations, other savvy investors see the opportunity and buy property to rent out to college students.
Here are some reasons why college towns are the best cities to buy rental property:
- Stable rental income – Buying a rental property with stable rent guarantees a positive cash flow for the real estate investor. As college admission continues to rise, the demand for housing has also been increasing. According to the National Center for Education Statistics, 13.2 million students enrolled for undergraduate programs in 2017, with the number expected to rise to 17.2 million by 2028. This spike in demand means that rents are likely to go up in college towns.
- Huge tenant pool – Every semester, college students will need a place to stay until they graduate. Besides students, the university faculty and staff also need accommodation. This means that college town real estate will always have a large pool of tenants to choose from.
- Low vacancy rates – There is always a college employee or student searching for a place to stay. This high demand means lower vacancy rates for rental properties in college towns. To cover the summer months, real estate investors should consider getting their tenants to sign one-year leases.
- The area sells itself – College towns offer a wide range of attractions including art galleries, nightlife, sporting events, and restaurants. Since the town sells itself, it is one of the best cities to buy rental property.
- Property appreciation – Due to the high demand, college town properties usually appreciate significantly and steadily over time. This means that investors can make a good profit when they decide to sell the property.
Related: The Best College Towns for Buying a Short-Term Rental Investment Property
However, despite being among the best cities to buy rental property, owning investment property in college towns also comes with several risks. This includes potential property damage, high turnover rate, seasonality, and demanding tenants. The first step in mitigating such risks is learning all about them. From there, you can set contingency plans and emergency funds to deal with these issues if or when they arise.
Wondering where to invest in real estate? Here are some college towns that happen to also be the best cities to buy rental property in terms of the average return on investment you can get:
Fargo, North Dakota
Fargo is one of the best cities to buy rental property as it is home to the main campus of North Dakota State University. With a population of over 127 million, Fargo is the largest city in North Dakota. Traditionally dependent on agriculture, the city has developed retail, food processing, education, healthcare and manufacturing economic sectors. Its booming economy has lured specialists, business visionaries, and pioneers from all over the world. As a result, Fargo boasts a rich racial mix of African Americans, Whites, Asians, Hispanics, and Native Americans. The population is expected to hit 133 million by 2020, thus making it one of the hottest real estate markets in America.
Related: 5 Emerging Real Estate Markets 2019 That You Need to Know About
- Traditional Rental Income: $1,382
- Traditional Cash on Cash Return: 2.0%
- Median Property Price: $253,010
- Price per Square Foot: $115
- Walk Score: 30
- Average Days on Market: 68
- Price to Rent Ratio: 15
Use Mashvisor to find a rental property in this popular college town.
Charlottesville, Virginia
The University of Virginia, an Ivy League university, is one of the main features of Charlottesville, Virginia. Home of a UNESCO world heritage site and two former U.S. presidents, this small town is one of the best places to buy a rental property. Its views of the Blue Ridge Mountains, rolling vineyards, and the downtown mall make this town an attractive destination with great livability.
- Traditional Rental Income: $1,684
- Traditional Cash on Cash Return: 1.0%
- Median Property Price: $483,230
- Price per Square Foot: $202
- Walk Score: 57
- Average Days on Market: 98
- Price to Rent Ratio: 98
Related: Where to Buy Rental Property in the 2019 Virginia Housing Market
Champaign-Urbana, Illinois
If you are looking to invest in rental properties in a world-class college town without the high cost of living, urban sprawl and traffic, Champaign-Urbana is the ideal location. This town is characterized by an urban setting surrounded by small farming villages. It is home to the University of Illinois, one of the most respected public universities in the U.S. With its theatres, festivals, museums, and live music scene, Champaign-Urbana is definitely among the best cities to buy rental property.
- Traditional Rental Income: $1,218
- Traditional Cash on Cash Return: 1.5%
- Median Property Price: $182,959
- Price per Square Foot: $106
- Walk Score: 81
- Average Days on Market: 129
- Price to Rent Ratio: 13
Columbia, Missouri
Home of Stephens College, Columbia College and the University of Missouri, Columbia is one of the best cities to buy rental property. Companies such as MFA Oil, Carfax, Columbia Insurance Group, and Shelter Insurance are also based in Columbia. The numerous entertainment venues and restaurants attract visitors and keep the town vibrant. This makes it a good place for a real estate investor thinking of buying an investment property.
- Traditional Rental Income: $1,109
- Traditional Cash on Cash Return: 1.0%
- Median Property Price: $263,972
- Price per Square Foot: $113
- Walk Score: 30
- Average Days on Market: 76
- Price to Rent Ratio: 20
Manhattan, Kansas
CNN and Money Magazine have voted Manhattan as one of the best places to retire young. Home to Kansas State University, the city boasts a lively entertainment and cultural scene. Besides the university, other major employers in the town include the Farm Bureau, Kansas Department of Agriculture, and the National Bio and Agro-Defense Facility. This makes Manhattan one of the best cities to buy rental property.
- Traditional Rental Income: $1,130
- Traditional Cash on Cash Return: 1.5%
- Median Property Price: $528,799
- Price per Square Foot: $314
- Walk Score: 79
- Average Days on Market: 68
- Price to Rent Ratio: 39
Final Thoughts
So which are the best cities to buy rental property? The best college towns to invest in are those located far from metropolitan cities. Real estate investors in the US housing market 2019 should take time to evaluate the colleges and universities in the town. What is their housing policy? Do most students live on campus or off campus? Does the institution plan to decrease or increase enrolment? Generally, public universities have less strict student housing policies and higher enrolments than private schools.
Do you have a free Mashvisor account? Use our Property Finder to find lucrative investment properties that match your criteria in a matter of minutes in any of the above cities!
