Thinking of investing in a college town? We have some advice...

[Debbie Fales]

Did you know that there were 19.7 million students slated to attend college in the US in 2020, according to the National Center For Education Statistics? Such a large market presents a potentially lucrative opportunity for real estate investors—as long as you understand a few unique characteristics about this demographic.

Consider location relative to campus accessibility.

One of the biggest pulls for students looking for off-campus housing is location and livability. Finding housing a short walk to campus is one of—if not the most—important considerations that college students make in the search for a rental property. Assess the convenience of any potential investment property by considering typical walks to class, libraries, or—if applicable to your town—a downtown area (think shops, restaurants, or bars).

Don’t expect tenants to sign long-term leases.

Considering that the majority of renters will be students, tenant turnover will be high—undergraduates especially tend to change housing year to year, meaning renters who are willing to sign a lease over one year will be few and far-between.

Instead, encourage lease “pass-downs”.

One main concern in real estate investing is vacancies—a valid concern, especially in a college town, where the rental off-season between semesters will deplete the prospective rental pool. One way to create tenant reliability and prevent vacancies is by encouraging “pass-downs” or “lease-takeovers”. A “pass-down” lease refers to the current tenant essentially signing over their lease to the next tenant, and if your property is in-demand, encouraging this can limit vacancies and create student appeal.

Consider demand when determining rent prices.

The beauty of real estate investment in a college town is stability in rental prices. With a reliable tenant pool and well grounded property appreciation, you typically won’t have to worry about rental prices falling—there is a good chance you’ll be able to get even more for rent than you otherwise would. Since the school plays a big role in supporting the surrounding town’s economy, college towns are some of the most dependable spots for real estate investment.

Know your audience.

Though it is true that college students as tenants may be younger and less mature than your typical renter, don’t let this deter you. Instead, make sure to prioritize the security deposit and use discretion in choosing renters.

All-in-all, investing in real estate in a college town is a good opportunity and sound investment. With a reliable tenant pool, stable rent, and high demand, the plusses far outweigh the minuses in most cases.

[Steven Huynh]

Awesome! I actually know an operator who has prior experience regarding investing in student housing. He says that hiring property managers for such an asset class can be very tricky.

[Debbie Fales]

Good point, Steven Huynh. It makes sense to use a property manager with experience managing this unique tenant pool. 

[Jay Hinrichs]

Originally posted by @Steven Huynh:

Awesome! I actually know an operator who has prior experience regarding investing in student housing. He says that hiring property managers for such an asset class can be very tricky.

Main thing is to vette the parents and get their PG ... 

[Jeffrey Donis]

Very interesting- thanks for sharing! 

[Debbie Fales]

Glad you found it helpful @JeffreyDonis. Good luck out there! 

[William Costello]

@Debbie Fales all good points, thanks for sharing. Having single family homes renting to college students could require some heavy lifting 

[Evan Polaski]

There are several investors in my area that started specifically in college, off-campus housing.  Some expanded into other multifamily and some stay with it.  But as you mention, there are definite risks.  

I was considering it when starting, but was talked out of it by friends and fellow investors.  The turnover rate and having attended a few huge house parties while in college were the primary two reasons I decided against it.  

[Crystal Dudley]

We are just getting into college rentals and have been trying to read everything in the forums regarding this type of investment. Thanks for the information.