College Houses as first time investments... Thoughts?

Question

Hey guys,

I was wondering what your experiences and thoughts were regarding renting out a house to college students. This is an area that I believe I could realistically start my real estate investing when I graduate from college this upcoming spring. Just thought I would reach out and see what previous investors have experienced with this niche in real estate.

Sam

Sam Steadman · Answer

@John Cohen

That is awesome to see you started out that way and makes me more confident that I could also be successful. Thanks for the response. I really appreciate it.

Sam

Kelly N. · Answer

Hello Sam,

We invest in a college area, probably 50% of our tenants are students, and it has been a good niche for us so far.  There are some minor head aches associated with a younger tenant pool, but I have never had trouble filling a unit.

I would advise you check into multi family (2-4 units) in the area, personally I prefer these to renting a single family home to a group for a whole lot of reasons.  Less bickering if less tenants are sharing a space, less parties with smaller units, and no issues with the authorities limiting the number of unrelated adults at one address.  If one unit is vacant, the others still cover the bills.  On the other hand, single family homes would have tenants paying all the utilities and you wouldn't have to deal with bickering between two units...

Kelly

Sam Steadman · Answer

Account Closed

That is my mindset too! I am willing to sacrifice to make that next step earlier in the process. What did your deal #2 look like? Did you end up buying another property that was similar to the first and rented it to other college students? Or did you focus on another niche of real estate?

Thanks for the honest feedback. I agree with you that to be successful you have to sacrifice and be uncomfortable at times. I bet that property is paying off now though!

Sam

Sam Steadman · Answer

Nick,

What did that look like for you? How was it living with people still in college while you were not in college? I am thinking about doing this and what were some of the struggles you had with this first investment and living space?

Thanks!

Sam

Sam Steadman · Answer

@Edward B.

Sounds like a nice balance and I agree that college students in Grad school would be more responsible and less of "party animals" compared to undergrad students. Nice to have a tenant base from two streams including college grad students and young professionals. For sure something to think about when looking for an investment. Good luck with future properties. Thanks for the response.

Sam

Edward B. · Answer

@Sam Steadman

I have a duplex that is kind of a tweener. It attracts both college students from a medical school 1 mile away and young professionals. We bought it while my wife was in school and she lived in it while we rented the other unit. It has been one of my better properties, but it may be due to the fact that it attracts graduate students vice undergrads. We had some issues with the first tenants but nothing major. They had some "get togethers" get a little out of hand every once in a blue moon but nothing major.

The units are only two bedrooms too so it doesn't allow people to pack in. Both tenants stayed this year, but again that is more particular to graduate students. They tend to be more mature and focused. There is an area on the other side that attracts a lot of undergrads. We looked there but ultimately opted away. Not for any reason in particular, just didn't find anything that made sense financially and in light of the fact that we would be living there too.

Ed

Sam Steadman · Answer

@Stan Butler

So you found that with the heavy turnover it wasn't worth the extra income flow per month? I'm assuming that if you have a couple properties it could start to eat up a lot of time to continually find new tenants. Also, I'm surprised that your property did not have a reputation from the student body, which would lead to an easier time finding tenants. My experience is that the properties around campus have good reputations and that the owners do not have a tough time finding new tenants.

However, I could be totally wrong b/c this is coming from the student perspective and I'm not the owner who is searching for tenants.

Thanks for the great post.

Sam

Sam Steadman · Answer

@Carl Carlson

I'm happy to see you are having success in this niche. How was purchasing that second house different than the first? Did you have different financing? Did you find if fairly easy to make the acquisition or much more difficult to acquire that second income property?

Funny that you thought it was a dump, but that others said it was nicer than a lot of other properties in your area. As a college student, I have seen that many college students and friends have a  high tolerance for a dirty and messy house to live in off of campus. With that said, I feel like it would be better to attract cleaner tenants by having a nicer property.

Sam

Stan Butler · Answer

We had one home that was not intended to be a college rental, but that ended up being our clientele.  The pros are that you can get a premium rent because each tenant is only worried about the cost of their room.  So where we might only get $1,100 for a 3/2 from a family, we were getting around $1,300 from 3 students.  The negative is the turnover, even more so than the wear and tear.  Over the 4 years that we owned the property, we never had a group of tenants stay longer than 1 year.  Most of them live on campus their first 2 years and then look to live off campus.  The other problem is that your window for finding new tenants is very short (2 months).  We ended up selling this property and buying another one in a more family desirable area.

College Houses as first time investments... Thoughts?

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