There are close to 80 million students enrolled in universities and colleges in the US each year and there are thousands of college towns with rental property investment opportunities in every state. From Nevada and California to Texas and Georgia, college towns are flourishing with the economic boosts brought by students and faculty staff moving in. There are seemingly endless towns for you to choose from for your investment portfolio. In Florida alone, there are close to 200 colleges and universities.
Investing in property to rent to college students has its pros and its cons. Like any investment type, when managed and researched properly, college town investments can offer a significant return.
Are College Towns a Stable Investment?
It is safe to say that investment in college town rental property has considerably more stability than some other investment types. There will always be fluctuations in the economy. However, college towns tend to have a more reliable economy thanks to the cash influx created by the colleges.
Property rental rates are kept steadier in college towns due to the high demand which means that you will be able to set your property prices at market rate instead of trying to compete in a tenant-short market. There can be fluctuations out of season when the majority of students leave town. Though to counteract these ebbs in rent, consider renting to shorter-term tenants during the holidays such as visiting professors and overseas students who are only in town for the offseason period.
Are College Towns an Easy Investment?
College rental properties are by no means a passive investment. If you are looking for an easy investment then the best option would be to engage a property manager to look after the day to day needs of your tenants. This will cut into your return but give you greater peace of mind if you already have your hands full and do not want to deal with the maintenance, repairs, and neighbors.
Every college town has a choice of experienced property management firms. These can be great advisors for property owners and for anyone considering investing in their town. It is not unusual for real estate investors to include them in their research rounds.
If the expense of a property manager makes you balk then instead, you can hire a student to manage your college town rental property for you. Matt Alder, a writer at Simplegrad, was a property manager whilst studying in the States. “I managed two student properties for three of my college years,”, says Matt. “When I wasn’t studying, I was advertising available rooms, checking in with tenants, and making small repairs”. Look for someone with good references that can be verified and give them a clear job description.
Is It Safe to Rent to Students?
Most students are looking for a safe, warm room or apartment that is quiet enough to study in. That along with privacy and somewhere to do laundry which they may not have experienced much of living in cramped campus residences. “Students are not the irresponsible property vandals that movies would have us believe. In my years in real estate, I have very rarely come across student properties that have been damaged with intent. ”, says Sherry Jones, a real estate blogger at Essayroo.
With student tenants, it is as important as ever to have strict tenancy agreements and reference checks in place. At least one reference should be a parent or guardian. You might consider adding a requirement for a parent to co-sign the tenancy agreement for added surety. It is vital with any rental property that you have renters insurance in place.
Renting to any kind of tenant comes with risk and damage will happen. Appliances will break down. This is not only in the instance of students but is true of all tenant types. It is recommended that a sum of the rental income is kept to one side to cover the costs of wear and repairs.
Is It Better to Have Only One Student Tenant?
On the plus side, having one student tenant should theoretically mean less stress for you, less damage, and less noise for neighbors to complain about. On the downside, if that tenant leaves town suddenly or fails to pay rent, you are out of pocket instantly.
Having two, three, or more students sharing your college town rental property may result in a little more management and property maintenance, but it also means that in the event of one tenant being late with rent payment, you have the other rental checks to tide you over. You also have multiple “word of mouth” advertisers when it comes to finding new tenants for the next college semester.
What Type of Investment Property Should I Invest In?
The type of investment property that you invest in comes down to two main factors. First is the sum that you are willing to invest (taking into consideration additional costs like insurance, furnishings, and management fees). Depending on which town you decide to settle on, property types will vary in price. An apartment close to campus may be considerably more expensive than a multi-unit property a little farther away. Something to consider with distance is demand. There will be greater demand closer to campus.
The second factor is the rental market trends for the area. This is an area you will need to research locally. In some college towns, students prefer to live in multi-unit properties that they share with friends whilst other towns have a large offering of small one-bedroom apartments that are a big hit. You should also look at the option of renting out a single-family home.
Whichever type of investment property and college town you decide to invest in, go into it with an open mind. College towns see a lot of interesting student spectacles. It is part of the experience. Knowing what you are getting into highlights the importance of researching a town’s rental market and a college’s reputation. Both should always be at the top of your list when it comes to investment.
This article has been contributed by Beatrix Potter.