Renting to students can be very profitable. It can also be very stressful.
Whether nestled in the heart of a booming metropolis or surrounded by miles of cornfields, all college campuses share the same population: students.
Excluding the students who choose the cramped confines of dorm life, most students seek some form of off-campus housing during the duration of their academic stay. As evidenced by the current top 10 college towns for buying real estate property, there are considerable economic benefits to renting out your property in a college town.
With these types of benefits it seems like a no-brainer to call your real estate agent and start buying properties immediately. However, there are several important factors to consider as a landlord before you do this. Do you like the potential for ludicrous home repair bills? What about an average turnaround time of one year for a resident? Basically, when all is said and done, do students make good tenants?
Pros and Cons
This is the good, the bad and the ugly of being a landlord in a college town:
One of the main benefits to owning a rental property in an area densely populated with college students is the consistency of renters. Barring an extreme natural disaster or other unforeseen circumstance, these educational institutions aren’t going anywhere – which means the flood of new potential renters flocking to the area each year won’t change either. This allows you to be somewhat choosy about the tenants you invite into your property, as there will always be a demand for the area.
In many cases, students also come with a very valuable asset: their parents. This ensures that you will have stable rent and can include the parents on the leasing agreement credit report. In addition, there will be less of a struggle regarding any repair costs at the end of the lease duration. Steady income from a second party is always a considerable plus when it comes to renters.
Renting to students also means that you can theoretically make more of a profit. Instead of hunting five pre-med students who happen to be best friends, you can rent room by room; renting individual rooms has the tendency to bring in more money in the long run. If this idea speaks to you, entertain the idea of putting some money into the property and breaking off rooms into individual apartments.
A downside to renting out your property in a college town actually goes hand in hand with one of the pros. While you will be assured a steady flow of new students champing at the bit to lease your property, this also means that you won’t be encountering many long-term renters. Prepare for a lot of turnover and flux within your rental property; for some this isn’t a problem, but for other it’s an unwanted responsibility.
College students are also typically inexperienced renters. Your home could very well be the first time they live away from home or off campus, which could mean that you have to be a very “hands on” landlord. Constantly receiving phone calls on how to operate the garbage disposal or having to visit the property to address very simple concerns isn’t ideal, and this could prove especially difficult for an absentee landlord.
Since you are renting out to very young tenants you can encounter your fair share of property damage, costly repairs, noise complaints, police intervention, etc. College students can sometimes be a rowdy and inconsiderate bunch. If you worry about excessive wear and tear to your rental property then renting out in a college town may not be for you. Setting a high security deposit can help offset some of these costs, but you should also be prepared to dip into your own pocket at times to pay for some repairs.
With students may also come some very inexperienced pet owners. Simply establishing a clause in the lease saying ‘no pets’ may not do the trick; the idea of a cute, cuddly cat or fluffy puppy is probably the best idea your potential renter thinks they’ve ever had. In reality pets can do enormous damage to your property and if you aren’t making routine stops to check in then you may not be aware until it’s too late.
As many of these are hypothetical situations, do take them with a grain of salt. You could have a renter of any age or occupation hitting all of the criteria above. If you organize a well thought out leasing agreement and prepare yourself for some less-than-desirable traits of college renters, then the rewards can be extremely profitable.
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