Investing in a College Neighborhood? Here are the Pros and Cons

College towns can be veritable gold mines for investors. There are a number of unique advantages that come with owning rental property in these areas that you won’t find with other locales. On the flip side, though, there are a few negatives that you may find with this type of investment. Here’s an overview of what you may see as an investor targeting property in areas close to colleges and universities:

Pros

• There’s a larger pool of renters. College kids don’t typically own their own homes. If they’re not living in the dorm or with mom and dad, they’re renting a place, and it’s often a house they share with roommates. This means that you have an above-average pool of potential renters who are looking for properties in close proximity to campus and other amenities.
• Less vacancy to worry about. Lots of prospective renters also means that vacancy may be less of a concern. With property around colleges and universities in higher demand than other locales, chances are good that your unit will stay occupied and you won’t incur losses associated with vacancy.
• More stable rent price. Rental rates are usually a bit more stable than other areas too, thanks to the consistent high demand for housing near the school. Because the demand usually exceeds supply, you can command a better price, even when the market is lagging around you.
• Less need for marketing. Most properties in college towns sell themselves due to their attractive location near campus, bars, restaurants, public transportation, and all the other great features that are typically found in these areas. On average, college town investors spend less time marketing these properties because they simply don’t need to.

Cons

• More wear and tear on the house. Guess what happens when you have a group of maturity-challenged college students living in a house without parental supervision and with easy access to alcohol? DESTRUCTION. Rental properties in college towns suffer much more damage than your average rental, and the security deposit you collect won’t always cover it. Be ready for holes in walls, damaged floors, broken cabinets, and more.
• Higher turnover. College kids are not universally recognized for stable living arrangements, and short-term leases are the norm with off-campus rentals. Kids come and go at semester, and most don’t stick with the same unit consistently.
• Might be seasonal. Building on that last point, there are some locations that might experience more of a seasonal flow of renters. While most of the bigger college towns are bustling year-round, smaller schools might see diminished crowds during the summer, which may affect your occupancy rate.

Potential for more work overall. If you’re looking for a passive investment, owning property in a college town where the majority of your renters are students may not be it. Between the high potential for property damage and the tenant turnover, you may be taking on more work than if you went with a more traditional investment.