Would a college town be certain death to a new investor?
New to Real Estate · Waco, TX · Member since 2021 · 9 posts · 4 votes
Would a college town be certain death to a new investor?
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Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
3yI'm assuming you're reffering to UT Austin? 1. Most those students get tuition paid by their parents. 2. Expect the worst, these are college kids not young professionals who go to bed at 10pm to wake up for work. There is going to be some abnormal wear and tear on the property. 3. Make sure each tenant is responsible for their rent, don't put one number on the lease and expect it to get collected and paid in total. Hold each student accountable.
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- Portland, OR · Member since 2022 · 9 posts · 3 votes3y
Also curious about this. When I think "college town" I think of 3-4 month vacancies in the summer, and of tenants who are learning to live on their own for the first time and likely to not take good care of the home. But I also think of the power of word-of-mouth in college communities that can help rentals stay filled.
Following!
- Rental Property Investor · North Palm Beach, FL · Member since 2018 · 2k+ posts · 1k+ votes3y
My first house hack was with students from a college I just graduated from. You can definitely make money but it is a little different from normal rentals. You have the parents apply with the student and co-sign with them. You can also request a larger deposit. In my experience, these students leave every 12 months and move elsewhere. I would charge a higher premium because of this. Maybe add 8%-10% to the monthly rent to cover you when they move out and you lose a month of rent as your prepare for the next tenant.
Lastly, and also a touchy subject, but it is difficult to have happy non-student tenants in a small rental property with student renters. The problem is renting a unit in a 3-family when there are students in the other 2. You cannot say in your ad that you are only accepting certain people but of course, the non-students are going to waste their time (and yours) when they talk to you and come see the property only to find out there are college students in the rest of the units. I would put some language in the ad explaining the property and say "X miles from (college name here)" and "a 3 family property with college students occupying the other 2 units" or something to this extent. The point is to let potential tenants know that there are college students there. This avoids people (and you) wasting your time. You can also advertise the property at the college.
- Member since 2021 · 256 posts · 213 votes3y
Andrew, student rentals is one of the best strategies for cash flow just after STRs. So that already goes in the graph "GOOD" per your question.
Yes, you always have a risk students not to pay but that is the same in the "real world" when you do not properly vet the tenants. With the cash flow you are going to have from the property, you are going to have plenty of reserves at the end of the lease of the student to fix it.
When you have a parent with credit score of 800 co-signing for their kid going to college, they are going to have a "financial" conversation before that is happening, trust me. That parent would not want the credit score to go to waste.
The best thing is you can choose who to rent to. Per my wife's sister: "Most of the guys that are idiots are going for Finance Degree, because they think its cool". She says that Computer Science and Medical Degrees are producing the best tenants.
Why I am telling you that is because I have considered Student Rentals and wanted to know from a person on the ground.
The best option for you decrease the concerns of the property care, learn real estate management and have a property that will potentially net you thousands in cash flow every month is to find a property you can house hack.
What college town we are talking about here?
- Real Estate Agent · Albany, NY · Member since 2017 · 309 posts · 149 votes3y
@Andrew Fudge I think a lot of real estate investing has to do with your attentiveness to the project and your initial analysis on the deal your going into. There are plenty of people who make college rentals work and there are plenty who have lost their shirt in them. That can be said for any type of real estate investment. There are positives and negatives to any investment you get into, but if you set up your systems and expectations with tenants correctly you can do very well with college rentals. So if you do decide to get into college rentals make sure you commit to doing it the right way by putting effective systems in place.
In my market the upside to college rentals is they generally do command higher than market/long term rentals even in the areas where they don't get paid for the summer months. The downside is that if you put a loud obnoxious tenant in your unit you could experience higher turnover costs when they leave and potentially have their neighbors be calling you to complain. However, with the right systems in place you can hopefully manage this and find tenants who won't be crazy.
One other thing I like to look for with college rentals is properties that don't have too much common space. College kids who want to party will go to the house that's best suited to host said party and if you've only got one small living room and a kitchen in your apartment you probably won't be the party house. Good luck!
- Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
I'm assuming you're reffering to UT Austin? 1. Most those students get tuition paid by their parents. 2. Expect the worst, these are college kids not young professionals who go to bed at 10pm to wake up for work. There is going to be some abnormal wear and tear on the property. 3. Make sure each tenant is responsible for their rent, don't put one number on the lease and expect it to get collected and paid in total. Hold each student accountable.
- Investor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes3y
I have heard enrollment is down in many college towns since Covid. I am actually super curious about this data too.
- Investor · Denver, CO · Member since 2022 · 184 posts · 78 votes3y
As a landlord, the lease term is up to you. My experience in college was that leases went from August - August.
I was in a college town where the demand for rental housing for upperclassmen was through the roof. A lot of that had to do with the city and the fact that there is limited housing and laws against building buildings over 5 stories.
Do the research into the relative income of the town and the income of the parent base. I went to school in a rich town with wealthy parents on average and I knew zero students who paid their own rent. Landlords had full pricing power because of limited housing stock and knowing that parents are going to stroke a check no matter the rent.
I'd say the opposite and claim that getting into a good investment home in a college town is one of the most lucrative ways to be in this game. The hard part is, the markets with high income parents and residents usually have high investor competition for deals when they hit the market and expensive property values. Lastly, the property management companies in these college towns usually have a monopoly and manage a majority of student houses. There is definitely some agism there in their aggressive fines, although, the strict fine structure surely incentivizes students to respect the house and not be morons.
For reference, my college town was Boulder, CO. If you're a student landlord there, you do very well.
- 3yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
Research, research, research so your expectations are aligned with the market.
Logical Property Management4.9458 Reviews - Real Estate Broker · Austin, TX · Member since 2012 · 1k+ posts · 1k+ votes3y
Get cosigners and hold their parents responsible
- Rental Property Investor · Santa Rosa CA · Member since 2014 · 56 posts · 48 votes3y
@Andrew Fudge College towns are great. I’m invested in Ithaca, NY myself. Seems to me that your primary concerns are regarding the quality of tenants and headaches involved with getting the wrong tenants. Nothing is guaranteed but look into rigorous screening processes and strong lease terms that protect you and give you the best chance of getting the type of tenants you want. I personally rely on strong PROPERTY MANAGEMENT that has solid proven experience with the local market. They will be best able to advise you on the nuances of the local market.
- Rental Property Investor · Santa Rosa CA · Member since 2014 · 56 posts · 48 votes3y
@Andrew Fudge One other thing to consider. I like to target students in graduate and PhD programs, instead of your typical undergraduates. They tend to be older, more mature and responsible. Good luck !
- 3yStephanie JacobsonBusiness MemberReal Estate Agent · Ithaca, NY · Member since 2016 · 428 posts · 324 votes
As usual @Christopher Liu has fantastic advice. I specialize in student housing in both Ithaca and Binghamton NY- management is key, and also being aware of any potential restrictions on student housing (Binghamton in particular is going through some upheaval in that department at the moment).
Students tend to be rough on the properties, but they also don't typically need to be evicted; they have bigger fish to fry with classes and whatnot. Many already have student loans or financial aid set aside, though in states like New York you can only take one month's rent at lease signing. Just stay on top of them and financially they're pretty reliable.
You also said your college town. Is this an area where you're already familiar with what the students look for and where they want to be? That's a huge advantage over other investors. My most successful clients are actually alumni from whichever town they're looking at investing in.
Best of luck, and keep us posted!
- Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes3y
When I went to college rent was collected upfront for the entire year
as well as 2 months security depositRentals closer to the bars rent for more money
- Real Estate Agent · Austin, TX · Member since 2018 · 63 posts · 48 votes3y
You'll probably have more turnover too, which will make it easier to raise rents to the current market rate and perform regular/annual maintenance.
- New to Real Estate · Waco, TX · Member since 2021 · 9 posts · 4 votes3y
Quote from @Christopher Liu:
@Andrew Fudge One other thing to consider. I like to target students in graduate and PhD programs, instead of your typical undergraduates. They tend to be older, more mature and responsible. Good luck !
Thank you for the advice! I hadn't thought about the complications I could skip if I just properly vetted my tenants.
- New to Real Estate · Waco, TX · Member since 2021 · 9 posts · 4 votes3y
Quote from @Account Closed:
As a landlord, the lease term is up to you. My experience in college was that leases went from August - August.
I was in a college town where the demand for rental housing for upperclassmen was through the roof. A lot of that had to do with the city and the fact that there is limited housing and laws against building buildings over 5 stories.
Do the research into the relative income of the town and the income of the parent base. I went to school in a rich town with wealthy parents on average and I knew zero students who paid their own rent. Landlords had full pricing power because of limited housing stock and knowing that parents are going to stroke a check no matter the rent.
I'd say the opposite and claim that getting into a good investment home in a college town is one of the most lucrative ways to be in this game. The hard part is, the markets with high income parents and residents usually have high investor competition for deals when they hit the market and expensive property values. Lastly, the property management companies in these college towns usually have a monopoly and manage a majority of student houses. There is definitely some agism there in their aggressive fines, although, the strict fine structure surely incentivizes students to respect the house and not be morons.
For reference, my college town was Boulder, CO. If you're a student landlord there, you do very well.
Thank you! The competitiveness in the area is pretty intimidating to me as a new investor, however the abundance of local property management companies near me makes things a little more calm.
- New to Real Estate · Waco, TX · Member since 2021 · 9 posts · 4 votes3y
Quote from @Stephanie Jacobson:
As usual @Christopher Liu has fantastic advice. I specialize in student housing in both Ithaca and Binghamton NY- management is key, and also being aware of any potential restrictions on student housing (Binghamton in particular is going through some upheaval in that department at the moment).
Students tend to be rough on the properties, but they also don't typically need to be evicted; they have bigger fish to fry with classes and whatnot. Many already have student loans or financial aid set aside, though in states like New York you can only take one month's rent at lease signing. Just stay on top of them and financially they're pretty reliable.
You also said your college town. Is this an area where you're already familiar with what the students look for and where they want to be? That's a huge advantage over other investors. My most successful clients are actually alumni from whichever town they're looking at investing in.
Best of luck, and keep us posted!
I hadn't thought of my advantage just from living here and attending the college! I'm more confident in this area then if I attempted a long-distance investment. How would you best check student housing restrictions? Would that be something you go through the school to deal with or the city?
Thank you so much!
- New to Real Estate · Waco, TX · Member since 2021 · 9 posts · 4 votes3y
Quote from @Eliott Elias:
I'm assuming you're reffering to UT Austin? 1. Most those students get tuition paid by their parents. 2. Expect the worst, these are college kids not young professionals who go to bed at 10pm to wake up for work. There is going to be some abnormal wear and tear on the property. 3. Make sure each tenant is responsible for their rent, don't put one number on the lease and expect it to get collected and paid in total. Hold each student accountable.
Thank you for the advice, I'm actually referring to Texas State, a little south of us. However, the advice can still be applied! I'm far too intimidated to want to step into the UT market. I assumed in San Marcos, I could possibly have an easier time finding smaller properties/duplex's.
- Investor · Denver, CO · Member since 2022 · 184 posts · 78 votes3y
Quote from @Andrew Fudge:
Quote from @Account Closed:
As a landlord, the lease term is up to you. My experience in college was that leases went from August - August.
I was in a college town where the demand for rental housing for upperclassmen was through the roof. A lot of that had to do with the city and the fact that there is limited housing and laws against building buildings over 5 stories.
Do the research into the relative income of the town and the income of the parent base. I went to school in a rich town with wealthy parents on average and I knew zero students who paid their own rent. Landlords had full pricing power because of limited housing stock and knowing that parents are going to stroke a check no matter the rent.
I'd say the opposite and claim that getting into a good investment home in a college town is one of the most lucrative ways to be in this game. The hard part is, the markets with high income parents and residents usually have high investor competition for deals when they hit the market and expensive property values. Lastly, the property management companies in these college towns usually have a monopoly and manage a majority of student houses. There is definitely some agism there in their aggressive fines, although, the strict fine structure surely incentivizes students to respect the house and not be morons.
For reference, my college town was Boulder, CO. If you're a student landlord there, you do very well.
Thank you! The competitiveness in the area is pretty intimidating to me as a new investor, however the abundance of local property management companies near me makes things a little more calm.
Good property management is always a good thing.
Albeit you'd be borrowing at higher rates, if this town is a long-term investment for you, you may consider trying to get into that market now when there is less competition. Some investors have inelastic demand for real estate and will borrow at any interest rate. Most are very elastic and wait until debt is cheaper to borrow. If the market is worth it to you, borrowing at say 8% may not be a bad thing if that means you're able to get a spot.
- 3yStephanie JacobsonBusiness MemberReal Estate Agent · Ithaca, NY · Member since 2016 · 428 posts · 324 votes
Quote from @Andrew Fudge:
Quote from @Stephanie Jacobson:
As usual @Christopher Liu has fantastic advice. I specialize in student housing in both Ithaca and Binghamton NY- management is key, and also being aware of any potential restrictions on student housing (Binghamton in particular is going through some upheaval in that department at the moment).
Students tend to be rough on the properties, but they also don't typically need to be evicted; they have bigger fish to fry with classes and whatnot. Many already have student loans or financial aid set aside, though in states like New York you can only take one month's rent at lease signing. Just stay on top of them and financially they're pretty reliable.
You also said your college town. Is this an area where you're already familiar with what the students look for and where they want to be? That's a huge advantage over other investors. My most successful clients are actually alumni from whichever town they're looking at investing in.
Best of luck, and keep us posted!
I hadn't thought of my advantage just from living here and attending the college! I'm more confident in this area then if I attempted a long-distance investment. How would you best check student housing restrictions? Would that be something you go through the school to deal with or the city?
Thank you so much!
Get to know the guys over at zoning and code enforcement. You never ran into them as students, but they should become your best buddies in the area you want to invest in. Also google any recent articles with phrases like "Austin student housing" or "Pennsylvania State housing", or whatever else you can think of. A call to code enforcement will help, but anything they tell you about, try to get a copy in writing.
For example, in Binghamton there's this handy document that shows what the current zoning layout is:
https://www.binghamton-ny.gov/...
So I'll look at what the zoning is for a property using that map, and then I'll cross-reference here to see what the allowed uses are:
https://gis.broomecountyny.gov...
This is obviously just an example, but try to get your hands on the same two documents for your area.
And YES, you having lived there as a student is a HUGE advantage! You used to be exactly the kind of tenant you'd like to attract. Think like a student when looking at properties- is it a place you would have rented? Don't underestimate that!
- Investor · Austin, TX · Member since 2013 · 662 posts · 1k+ votes3y
@Andrew Fudge, yes indeed college towns are great places to invest. Texas State would be fine. I looked years ago at duplexes near that college but settled on College Station. Look for locations that suit students best. Go after the graduate students as they will take care of your property better. Lease terms should be one year starting in July and ending in July (15 July -15 July) works best. My students generally help me rent it out when they graduate. I offer them $100 to show their unit for me. Here is the key to making it work GREAT. You have to pre-lease your property. Meaning: In late January or early February start advertising for a July move in. Students begin looking and want to secure housing before they leave in May. Also, most students like the idea of having a place through the summer for which then can hang out. Many of them will attend summer school. I focus on post graduate, veterinary, and medical students. Students usually have many sources for rent. Main sources will be student loans, parents and part time jobs. Focus on smaller properties, like 2 bedroom duplexes. Too many students promote parties and usually with 3 students one will feel left out and want to leave mid-term. Once you get the hang of it, renting to college kids is easy peasy!
- Realtor · Dallas - Fort Worth Metroplex, TX · Member since 2016 · 1k+ posts · 925 votes3y
@Linda May Wacker we pay a full 12 months rent a year for our daughter in a college town. No breaks and a premium on rental prices. We’ve tried buying but the prices are crazy.
- 3yMelanie ThomasBusiness MemberReal Estate Broker · San Antonio · Member since 2022 · 1k+ posts · 489 votes
Create a strong leasing criteria and stick to it for all. I manage a few homes near colleges and haven't had any major issues other than a broken lease. Good luck & happy investing!
RentWerx Property Management4.73300 Reviews - Member since 2018 · 51 posts · 27 votes3y
I have college rentals in the Rochester NY area and have had very little issues with students or getting paid and I don't even have the parents cosign. I think a lot has to do with culture of the school, if its is a known party culture and known for the their "great times' then you are going to most likely incur more damage to your properties. If you have serious students like engineers, medical students, etc like we have around here, most stay serious and are model tenants. Not many parents are going to take the chance of not paying their child's rent from 3 states away so np problems getting paid. I do 1 year leases but I know many small towns with SUNY schools do by the semester and also some of the towns have stopped allowing homes to be converted to school housing and only grandfathered homes are allowed to rent to students and they sell for much more. Most schools around here have a rule as well that don't allow more than 3 people who are not related to live in a house with each other to slow down college homes. Every college town is different so do your home work when deciding location. Good luck
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes3y
The bulk of my houses are within 1 mile of our major university. I always did extremely well with students; some years 50% of my properties were filled with students, usually with parent co-signers. As the markets have gotten tighter my houses have filled up with families so I don't have much of it these days - I've only got one 3br that Mom & Dad are paying for their two daughters to live in while in university - but I never had any trouble with payments or evictions. Most parents don't want their kids starting off life with an eviction.
I'm going to bring @Will Gaston in here because he's a superman with student rentals.
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