Everyone is looking for the best places to buy a rental property. And while there is no ideal candidate that takes the cake on this one, there are college towns: possibly the next best thing to ideal.
While investing in college town properties definitely has some cons that we’ll get to, they can make for the best places to buy a rental property. Stick around to the end of the post to see the top 10 college towns in the US real estate market for investing in rental properties.
Why College Towns Can Be Some of the Best Places to Buy a Rental Property
There are four real estate investing pros to college town properties that we think outweigh the cons.
Tenants, Tenants, and More Tenants
When owning a rental property, it’s crazy how your one obsession becomes to find tenants but it’s also a totally logical obsession. If you decide to go with investing in college towns, finding tenants shouldn’t be an issue. For one, there are always tons of students every semester/year looking for rental properties. But that’s thinking small. Universities and colleges employ tons of people, from professors to general administrative staff.
So, depending on what kind of tenant you want for your investment property, you will not be short of choices. And you know what that means: steady rental income and cash flow. While some college towns may not offer this, the actual best places to buy a rental property listed down below will!
Worried about how to rent to college students? Read: The Guide to Renting to College Students
More Tenants= Higher Demand
A real estate investor knows that when there are more tenants flocking to a certain location, there is typically higher demand for rental properties.
But many of the best places to invest in real estate 20 years ago, for example, have lost their ability to attract tenants from all over. They are no longer considered the best places to buy a rental property as new cities and neighborhoods take their place. When investing in college towns, a property investor doesn’t have to worry about this. That’s because not only is the demand high for college town real estate, but it’s also steady.
We love to say real estate investments are low risk investments because there is always a need for housing, which is true. But protect your property investment even more by investing in the best college towns. You offer housing, the real estate market offers another thing that will always be in demand: education.
Steady and high demand definitely spell out low risk real estate investing. That’s because they also spell out high occupancy rate, high rental income, and an overall good return on investment with time.
Related: How to Find Low Risk Investments When Buying Rental Property
High Demand= Higher Occupancy Rate
College town rentals typically have a high occupancy rate. This is due to the combination of the last two factors: lots of tenants and high demand. And as part of your real estate investment analysis, you’ll find that the high expected occupancy rate will only have a positive effect on your return on investment.
Don’t Worry Too Much About Real Estate Marketing Strategies
The best college towns will allow you to simplify your real estate marketing strategies. Not only is this thanks to the already high demand from students and employees, but typically these real estate markets have a lot to offer to all kinds of tenants.
The walk scores tend to be high for college towns and you’ll find that all kinds of shops, restaurants, and entertainment venues are within walking distance of your long term rental. Still, the public transportation (buses, taxis, shuttles, etc.) is typically top-notch in these real estate markets. Many of the best college towns offer unique museums, art shows, and festivals as well, attracting tenants from all over who love to live in such lively locations. In fact, even retirees consider moving to college towns to benefit from all of these things. And the tenant pool for your rental property grows now to include retirees!
Essentially, when real estate investors try to market their rental property, they do their best to find the positives. With investing in college towns, most people are aware of these positives and are already at your doorstep trying to get a piece of college town life. Simple advertising and real estate listings are likely all a landlord will need.
College Towns Are the Best Places to Buy a Rental Property for Airbnb
While our focus thus far has been on long term rentals, an Airbnb investment property in a college town is a great idea. Think about it. How often do you hear people gushing about college football or basketball in your local bar or around the office? You might not share the passion they do for these sports, but you can cash in on it with Airbnb rentals. Tons of people flood into college towns every sports season and many choose Airbnb investment properties for their cost efficiency.
On top of sporting events, you have parents of college students visiting all times of the year as well as during graduations. There are all kinds of festivals from food to music to art catering to the college lifestyle. The quaint pubs and restaurants typical of the best college towns also attract Airbnb guests from all over. The best part about owning an Airbnb in a college town is that you may not experience an off season if you choose the right real estate market. All of this and more drives Airbnb occupancy rates, rental income and your return on investment with this strategy.
As always, be sure to check Airbnb regulations by city for any college town you wish to buy investment properties in.
Read about Airbnb in this college town: Now Is the Time to Invest in Airbnb Columbus, Ohio
College Towns May Be the Best Places to Buy a Rental Property BUT
There are real cons you need to take into consideration. Like we said, even with the best cities to invest in rental properties, there is rarely an ideal location. The smart real estate investor identifies these issues and attacks and prepares for them ahead of time.
- Tenant turnover is high with long term rentals. Students go as fast as they come. (Read this to negate this major con!)
- While you can learn how to rent to college students to make it easier, your rental property may suffer in terms of wear and tear. Keep this in mind when it comes to rental expenses.
- A real estate investor needs to research things like type of university (private or public) and the stats on off-campus vs. on-campus housing as they can affect the tenant pool.
- There can be an off-season with long term rentals in college towns leading to vacancies at times.
- Being a landlord in a college town, you’ll find college rentals are not passive income investments.
- Just because college towns can be the best places to buy a rental property, not every rental property is the best investment property.
Expanding on that last risk of even the best college towns, college town properties require real estate investment analysis just like any other investment property. This includes neighborhood analysis, investment property analysis, and comparative market analysis. Make sure you’re equipped with the right tools to be making money in real estate with college rentals.
We have the right real estate investment tools. Check them out here.
The Best Places to Buy a Rental Property- Top 10 College Towns for Investment Properties
Taking into consideration lists from Redfin and other resources, we have compiled our own list of the best college towns based on real estate data from Mashvisor’s investment property calculator in combination with the factors mentioned above. Consider looking for college town real estate in any of these cities for a good ROI and positive cash flow.
Best Places to Buy a Rental Property for Long Term Rentals
Trenton, New Jersey
Median Property Price: $150,447
Traditional Rental Income: $1,548
Traditional Cash on Cash Return: 4.24%
Walk Score: 69.05
Median Property Price: $236,408
Traditional Rental Income: $1,627
Traditional Cash on Cash Return: 3.33%
Walk Score: 71.61
Related: Baltimore Real Estate Market 2018: Why and Where to Invest
Median Property Price: $432,996
Traditional Rental Income: $1,943
Traditional Cash on Cash Return: 2.55%
Walk Score: 47.81
Median Property Price: $275,650
Traditional Rental Income: $1,413
Traditional Cash on Cash Return: 2.42%
Walk Score: 80.44
Related: Top Philadelphia Real Estate Market Trends for This Year
Best Places to Buy a Rental Property for Airbnb Rentals
Median Property Price: $276,682
Airbnb Rental Income: $1,782
Airbnb Cash on Cash Return: 5.86%
Airbnb Occupancy Rate: 58.9%
Walk Score: 38.6
Median Property Price: $418,828
Airbnb Rental Income: $3,477
Airbnb Cash on Cash Return: 5.25%
Airbnb Occupancy Rate: 52.33%
Walk Score: 28.97
Related: The 7 Best Nashville Neighborhoods to Invest in Real Estate in 2018
Median Property Price: $269,576
Airbnb Rental Income: $2,292
Airbnb Cash on Cash Return: 5.14%
Airbnb Occupancy Rate: 48.36%
Walk Score: 28.4
St. Louis, Missouri
Median Property Price: $198,299
Airbnb Rental Income: $1,956
Airbnb Cash on Cash Return: 4.3%
Airbnb Occupancy Rate: 55.94%
Walk Score: 63.61
Median Property Price: $263,713
Airbnb Rental Income: $2,042
Airbnb Cash on Cash Return: 4.09%
Airbnb Occupancy Rate: 53.39%
Walk Score: 61.03
Median Property Price: $339,864
Airbnb Rental Income: $3,087
Airbnb Cash on Cash Return: 3.96%
Airbnb Occupancy Rate: 50.39%
Walk Score: 36.04
To get your hands on an investment property in any one of these cities with higher-than-average returns, click here.
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