Hey guys!
I am thinking about a new target area to invest into our next property. I thought college towns would be good since students need affordable housing, however I want to ask your experience with college towns.
My concern: property will be in the summer, since most kids would want to go home and not pay for the months they are absent.
Thanks!
Edita
My experiences in two different college towns have been that the towns make good places for REI, but college students do not usually make great tenants. My recommendation is to be close to good job markets in college towns, but don't invest in RE that would likely attract college students for tenants unless you want turnover, trash left behind, and calls from the neighbors. Just my opinion...
I like college towns but Im not so much into college rentals for 2 main reasons they often are empty 2+ months out of the year and they are more work to turn over as the apt comes empty. How ever I am told by those that do college rentals that the higher returns make up for all that. another thought is that the students graduate in 3 years and are gone which means you never get tenants to stay over 3 years. I say 3 years because the majority freshman stay in dorms or are home with mom and dad. If students dont get along then you have other issues but it causes some units to go vacant before the lease is up. Or one student leaves and the others are on the hook and may not be able to afford to pay. We wont go into 1/2 barrel parties and other things that they do.
The non college rentals as one might call the rest of the population could stay in your unit many years if they dont want to move. I like people that stay in my units a long time its cheaper because Im not paying for turn overs.
im with John on investing in college towns though because its important to have schools,jobs hospitals and something about the area interesting like here are some examples. a nearby water feature like beach,ocean,port,major river,lake mountain w skiing, or mild climate.
I look at 3 things 1st when I am looking at a town to invest in Jobs, Schools, Hospitals. The other stuff I factor afterwards like Growth, ROI,local economy, political city,is it a capital those usually do Well.
If you decide to go with college rentals get co signers and decent security deposits, Dont forget the credit check and condition reports they are important.
College students are pretty smart at figuring out if you miss something they might be able to stay free for a while or not pay at all. You would be surprised how fast they become experts at tenant landlord rights vs the rest of the population out there. I have not had that many college rentals near a campus but have had plenty of students rent my homes off campus.
If you are in a city where that college is expensive it can be nice since often those parents pay entire rent and its guaranteed. In towns like this I find the college areas appreciate pretty fast. Take a look at the property around most Ivy league schools.
John, I am wondering if you ever tried renting to Graduate students. Perhaps there are less potential graduate students that would want to live near campus as they are older and might be married etc...but I would think they would be more responsible more focused on studying versus partying?
I've heard this a lot about college rentals how there is lot's of turnover, and the other various problems.
Our first home was next to the Harvard medical hospitals and in better school district. Bc it was our need too at the time.
So renting it out is no problem.
my current tenant and family is 4 going to 6 yrs bc need further studies. Residency, fellowship. Are long year but temp.
I'm in a college (state university) town allong with three other large universities a state vo-tech jr. college and several business colleges.
I'd say that any state university will be adding alot to the local economy base, in fact it's an anchor that will likely be the most stable activity in any area. We are also a regional medical center in a 4 state area. These are two aspects that any industry will look at to relocate or start up being close to an educational center provides a skilled (and unskilled) work force.
While it's not just students needing housing there is the faculty and staff. You'll find all the complimentary businesses that cater to students, restuarants, clothing stores, auto repair, the list is endless, just think of the athletic depts and activities that are needed to support a school sporting events.
I rented to college kids, generally they will be jr and sr and grad students. Out of town freshman are usually required to stay on campus. So you're not really renting to an 18/19 year old.
I leased annually and did not have any vacancy issue, in fact my tri-plex rarely had one unit empty, it would only be 2 or 3 weeks. That is not everywhere, it was that the units had all been a gut rehab, pretty nice, the units were close to the school and the kids loved it, they kept the place leased we rarely advertised.
The key to renting to college students is having a meeting of the minds before they move in, lay down the law in a nice way, like a parent! (Because you will be a parental figure, if you're old enough). Next and most importantly is that the parents sign the lease with one lead tenant. My lease was on a sliding scale for additional tenants. I held one tenant and that parent responsible and NEVER had a problem in over 12 years.
What happens with keeping one on the lease is that they get roommates (with my approval and lecture) and when that tenant leaves the others in there step up to lease it, so there is a flow of tenants going through. Don't forget summer school, universities don't close for very long at least not entirely.
Frankly, if I was interested in doing rentals in any other area, it would be in a college town, if an area didn't have a large school as an anchor I doubt I'd even look at it, just wouldn't go there!
Here in Lexington around campus rentals are sky-high! UK doesn't even have enough dorm beds to fill the freshman class alone, so the demand for off campus housing is competitive.. For Rent signs are up and gone with-in a week or two for most of my neighbors. (Leasing for August 2013 started in January.)
I would suggest to ask students where the "nice" neighborhoods/streets are to live off campus and target research there. Higher rents are demanded and you get away from the "party streets"
I have had the same tenants for two years, and now they are all staying for Graduate school and re-signed their leases. Most campus houses around this area are 12 month leases, so I don't have a problem with long vacancies.
I think off campus housing has a lot to do with demand. Here in Lexington, if you want to walk to class, and find a nice place to live you have to start searching at least 4-6 months early. This makes it easier as a landlord because you have a variety of applicants to chose from.
Hope this helps from a college guys perspective. I like to give college students more credit than they get for rentals; you just have to put in your due diligence to find the right students. (I'd like to think I was!)