Are College Town Rentals Crazy?

Question

We are out of state investors considering investing in a college town rental, specific to student tenants.  Texas A&M and Texas Tech have been on our radar.  Does anyone have either any area-specific advice or general opinions about college town rentals?  Are we asking for trouble?  Thanks!

Jim Cummings · Answer

@Joel O'Leary. College Station is about to pass a law (or may have just passed) that no more than 3 unrelated people can live in the same house. Investors who own a 4-5 bedroom house renting by the room to students just got screwed!

NOT TRUE! Bryan (City adjoining College Station) was considering  such an ordinance - but the proposal was pulled when the economic impact was considered.

What is True is a number of Luxury Apartments (Student Focused) are being built in College Station.

And for that reason & others I have limited my purchases to SFR. I would consider buying Multi-Family (2-Plex, 3-Plex, 4-Plex, if the right opportunity was available in the right location for my criteria.

Ritch Bonisa · Answer

There's a classic play that's been done for years.  1 year before your kid goes to college.  Buy a rental, when you're kid attends the college - let his friends pay for the rental.  When it's paid off, give it to your kid, let them begin their investing career with cash flow.  I've seen this one alot in Bloomington, IN  - Indiana University.

Van Blackman · Answer

@Mike Woods,

How are you sir?

I graduated from a major university in Texas in 2011.

I had several pals who opted to rent out houses in close proximity to the campus rather than paying a little more for a nicer apartment complex.

I would like to think that any reasonably located house near a large university would be okay - students will ALWAYS need housing. I guess the big question is, as always, who are you renting to? 5 frat guys, or 5 honor students?

I was a frat guy. We definitely didn't take 100% care of the property! That being said, irreparable damage was never the case (it was mostly just the aftermath of post-class activity), and rent was ALWAYS paid.

Are you "asking for trouble"? You're asking for potential trouble in ANY rental you purchase. A bad apple can slip through the web anytime, whether it's in a college town, or in a middle-class neighborhood.

The good news is, at least with me and my pals in college, a lot of our rent was paid by the parent/guardian of the tenant. The landlord could rest assured that they weren't relying on a party-crazed 20 year old for rent - their parents were on the hook for it. I'm sure if you went found a house at a big enough school, and leased to the right tenants, you'd be very happy with your rental on any campus.

Just my opinion! Hope it helps!

Thanks,

Van

Jordan Sutherland · Answer

@Mike Woods There are still some opportunities around Texas Tech. I've lived in the area for the past 20 years. Our city has an ordinance that states no more than three unrelated people can live in the same residence. My family owns a property management company and manages several student rentals. This topic comes up quite a bit with our out of town and out of state investors. My mom has been managing properties here for over 20 years. Although it is a city ordinance, it is rarely enforced. She has only had that happen to her tenants one time. Basically, if you have a bunch of college kids throwing big parties every weekend and it becomes a nuisance to the neighbors, that's the only time it will become a problem. She said that several years ago she had one set of college kids that were doing this and they got the police called on them several times for noise, etc. In that case, they may enforce that ordinance, but it is very rare. I don't know how it works out near other universities, but at least around TTU you're pretty safe. We've seen pretty substantial growth at TTU. In the past ten years, the undergrad enrollment has gone from 23,000 to 31,000 and is projected to continue growing. The campus is the second largest campus in the nation, so they have plenty of land and resources to keep up with a growing student population. Texas Tech is also one of the few universities that has a law school and medical school on the same campus. They are both located in Lubbock. The town as a whole is also growing at a steady pace. In addition to a growing university, Lubbock has probably the best hospital within a 300 mile radius with University Medical Center. They are currently breaking ground for a second loop on the South side of town. I've heard that in many college towns there is too much competition to even purchase a cash flowing property. There is definitely some competition here, but property prices here are still pretty low in comparison to most other markets. The market for family rentals is strong here as well.  I've seen some long distance investors get burned out here, but for the people that actually know the local market or have a good set of boots on the ground, there are a lot of opportunities. If you'd like some more info on Lubbock, feel free to send me a message. Hope this helps!

Patrick Liska · Answer

Mike,

@Joel O'Leary has it right, i can tell you first hand. know your school and the town. the college i have a few student rentals at had a decline in enrollment and had just built new housing. they did not have enough students to fill the housing. they used to mandate that Freshman stay in the dorms, now because of the decline they changed the policy to Freshman and Sophomores have to stay in the dorms, that took a huge hit on a lot of investors in the town. otherwise i think student rentals are a good investment, that's how i started. Just make sure you do your homework before jumping in.

Will Gaston · Answer

@Mike Woods great advice from @Joel O'Leary. Know the ordinances of the market well. Being uninformed could be disastrous.

Location and proximity to something fun (i.e. bars/football stadiums) is much more important than amenities in my experience.

Here’s a post I recently made on student rentals that may be of value. I haven’t seen it all, but I’ve seen a lot.

https://www.biggerpockets.com/forums/52/topics/491641-nearing-1-000-college-student-tenants-heres-what-ive-learned

Joel O'Leary · Answer

@Jim Cummings Thank you! I stand corrected!

Good example of how local knowledge is more accurate :)

Are College Town Rentals Crazy?

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