student renters

[Kimberly Gillock]

Hello BP community! Landlording question for you all -- I am under contract for a SFH by a university, closing in early April. Wondering if anyone had advice on renting to students? I would ideally rent to grad students or young professionals, possibly even professors… but if the renter pool ends up being more undergrads, does anyone have any specific advice on renting to this population? I plan on having the parents co-sign the lease if they don't qualify on their own. Do I need to do an additional credit check on the co-signer? All tips and advice welcome! Thanks!

[Roy N.]

@Kimberly Gillock 

We have several student rentals and a student rooming house which provides furnished rooms to international students.

As you already seem aware, students rarely have sufficient credit history, income, or assets, to carry a lease on their own - even if 4 or 5 of them are applying for the same house.   In most instances we require a guarantor (typically a parent or grandparent) to guarantee the candidate.   We perform credit history and employment reference checks on guarantors.  

In our locale, we have a standard form lease, which has provisions only for tenants to the lease.   Rather than have the guarantors co-sign the lease (effectively making them a tenant), we execute a separate guarantee agreement with each guarantor and include these as a Schedule to the lease. 

@Marcia Maynard suggestion to search the forums will bear lots of fruit as there have been many discussions about renting to students and several different approaches outlined.  Lots to learn there.

As a starting set of very general guidelines, I would put forward:

- Leave your tenants with few operational responsibilities; bundle them into your base rent. viz. When we started, we use to give students the option of shovelling their own snow from the drive at our student houses.  Students would always take the responsibility for shovelling as they did not want to pay to have the drive ploughed, but rarely would they keep the drive shovelled and, if they did shovel, snow would get push just far enough to be able to move their car ... come March, the driveway was half the size it was in December and the tenants would be snivelling about not having enough parking.   Lesson learned: we now include snow removal and lawn care as part of the rent.

In our rooming house, we are about to start baking a weekly cleaning service into the rent as no one seems to be able to keep the bathrooms and kitchens clean and orderly.

- renovate for durability, energy efficiency, quality and low maintenance.   In general, students, many of whom are away from home for the first time, know little to nothing about how a house operates.  They are also at that stage in life where they will shower twice a day and run the laundry to wash one favourite pair of jeans.  It pays to keep energy efficiency (low flow fixtures, low stand-by loss hot water heater, LED lighting {without bulbs}, efficient HVAC),  durability (i.e. we install humidistats with all bathroom fans to ensure they are run sufficiently long following a shower), and low maintenance (we use lots of tile and vinyl plank flooring, 3-piece full surround tub/showers) in mind when renovating your student rentals.   I see many local landlords always use the cheapest option available which nets them better returns in the short term, but they replace items far more often.  Students are hard on houses - but not for the Animal House reasons - simply because they are young and do think about repercussions (why wipe up the water on the floor, it will dry);

- inspect your units frequently.  We perform quarterly inspections on all our student rentals.  While the primary purpose of these vists is routine maintenance (clean/change HVAC filters, check backup batteries in smoke/CO alarms, etc.) it provides an opportunity to survey the state of the property and find small issues (the leak under the kitchen sink) before they become large problems (the students will not notice, or remember to tell you, about the leak under the kitchen sink until water drips from the ceiling below)

- hold tenants accountable for utilities.   When possible, you want your student tenants to be responsible for their utility and resource consumption.  As mentioned, they will shower twice a day and run the laundry for one item ... they will also leave the lights on and raise the heat even when they are not home (they are always overriding the programmable thermostat installed to save them money).  As such, it is best for your bottom line and their education {which is why they are at university} if they are accountable for the utilities.   

That said, students, and their parents, prefer renting with one payment and utilities included - the students, because its easy; the parents because they worry everyone else's children will shower twice a day and do laundry for a single item and would like it to be your problem.  We offer a Utilities Budget Agreement in which the utilities remain in our name, but the tenants make a monthly pre-payment into a fund.  We provide them with copies of all utility bills and a monthly account statement.  Every three months we reconcile.  The key here is to set the prepayment sufficiently high that there is a surplus in the budget at the end of three months.   When you reconcile, the surplus can be left in the budget for upcoming months (winter) or applied towards the following month's rent.

We also provide our student tenants with additional services aimed at their lifestyle.  One example is our "Take me home" card.  We have an arrangement with a local taxi service which allows our tenants to call a cab when leaving from "a night out", show them their "Take me home" card and receive transportation back to their house/apartment ... even if they have spent all their money earlier in the evening.   We provide our tenants with X number of "free rides" at the beginning of the school year, but they can use the card beyond those complimentary cab fares.  The cab company bills us and we pass through the costs to the tenant.    

In short ... looking up this is far from short, and I've merely scratched the surface ... renting to students involved more work, more drama and more shaking of your head, but it can be very profitable.