Dance Floor, Lets Work! Renting to College Students

My wife and I own/operate a few properties that we rent to the students of our Alma Mater. We’ve heard plenty of landlord horror stories, particularly those related to college students, but (*knock on wood*) all of our tenants have been tremendous thus far.

Anyways, we’re planning a kitchen remodel at one of the properties over their Christmas break. I started a text message thread with the kids to make them aware so they could get their stuff out of the kitchen. As expected, they were thankful the work was being done. After all, they’re getting new cabinets and granite. Why wouldn’t they be happy?

Then came 1:12AM on a drinking night. Apparently, they forgot their landlord was on the thread:

Regardless of instances such as the above, owning college rentals has been a tremendous experience thus far. Sure, we get a few more phone calls than one typically might get from a market-rate tenant - owing to the fact that this is likely these students first time living in a home along.  But the incremental rent we collect offsets that. 

For example, let's take a look at the numbers:

Acquisition & Rehab Price: $83,000

Rent: $1,600/mo vs. market rent of $1,150 

Assuming regular expenses, etc. I get monthly cash flow of $825 on $1,600 in rent vs. $370 at the market rent number....so an incremental $456/mo.

That's a cash-on-cash return of 38.5% w/ college tenants vs. 18.2% with market tenants. 

 Looking at it on a cap rate basis, it's a 14.1% cap with college tenants and 9.1% cap with market tenants. 

So, it the extra income worth the extra phone calls? You betcha!