Hello Everyone,
I am currently the owner of two single family rental homes in the college town of Davis, California, few miles east of the San Francisco Bay Area. I have managed every aspect of the rentals from finding tenants, to getting rid of them, to fixing HVAC systems in the middle of the summer. Many mistakes were made managing my rental properties and I will most likely continue making different mistakes in the future but I have ultimately learned from them and have become a far better real estate investor because of it. I have built and fined tuned systems to minimize my involvement with the rental properties and have more of a turn key type of business by understanding the business and finding reliable and trustworthy contractors and real estate agents. I wish to open a discussion so that other investors in college towns can share situations they have run into and how they dealt or would have dealt with it so that other investors can avoid making the same mistakes. Also, it would be interesting for investors to share some of the pros and cons of investing in college towns.
University of California, Davis is a prestigious non-Ivy League school with students that mainly come from middle class families. (I have dealt with students from families in the higher tax brackets and they tend to be higher maintenance)
Pros:
- College students do not stay forever and their living situation is very flexible, so if there is a need to get rid of them, it is easy to do so.
- Vacancy is rare due to the abundance in students.
- Low maintenance tenants - they tend to not have specific preferences when it comes to countertops, flooring, landscaping, etc.
- Low Hassle tenants; few students are willing to take things to court and they tend not to fight decisions that the landlord has made.
- Most college students have a financial plan for college and are able to pay rent every month. Ruining their future by having a black mark on their record at an early age is not an option for the student or their parents.
- Many outlets to find tenants such as university sponsored programs, websites and even student run social media pages to find housing.
- If the school has an international program, short term - higher rate rentals are plausible. Plus its pretty neat meeting students from other countries.
Cons:
- Student drama amongst roommates - This can be mitigated by signing the lease with a master tenant and having him/her deal with renting out the other rooms.
- Messier and not care about the rental - This can be mitigated by collecting a higher security deposit and doing a thorough move-in inspection.
- Turnover every couple of years - It is extra work, but tenants in a college town are easy to replace and the hassle is also offset by reducing the risk of getting stuck with bad tenants and having to evict them.
- Extra bodies in the house - girlfriend and boyfriends that move into the house without a proper lease agreement. Make it clear in the lease that the landlord has to be informed of the situation and set clear rules for this kind of situation.
Best,
Kenneth
