Are you the right kind of landlord for a real estate investment in a college town? You’ll need more than school spirit to profitably house college students, but investing in a college town may be a perfect choice for the active landlord who can handle a certain amount of wear and tear due to youthful exuberance. However, for a landlord who prefers a more passive role in property management, investment properties in university towns may be the wrong way to go.
The Good Stuff
Community thrives in a college town
College towns are notoriously cool, and offer amenities that are unavailable in the suburbs and rural areas. The unique needs of faculty and students work together to create a community that has a lot to offer in the way of arts, restaurants, entertainment, and depending on the area, green space. The university itself hosts cultural events, sporting events, guest speakers, and programs often open to anyone affiliated with the school. Restaurants pop up everywhere in order to satisfy the frequent dining out needs of students, offering food that is as diverse as the population of students. Some universities offer public transit systems in places where transit options would be otherwise limited. A community like this will always be a draw for new renters.
A new batch of potential tenants every August
New college students show up like clockwork every year, and while many start out living in on campus housing, there are always sophomores and juniors itching to more off campus into a private rental. While the main influx of students happens at the start of the Fall Semester, transfer students, graduate students, and new faculty and staff move to town all year which makes for a steady supply of potential renters.
Fewer long-term vacancies
The demand for rental property in college towns remains high despite other market fluctuations. Many university towns are home to notoriously tight rental markets, with the sheer volume of renters lowering the odds of a vacancy significantly.
Steady rent prices
High demand keeps rent prices from fluctuating despite other market changes. This demand also affects housing prices in college towns, making the property itself likely to hold value over time. Stand alone housing that would be considered single family in the suburbs (perhaps occupied by one or two incomes) can house three or four students in a college town, allowing for a higher rental price. Many college students are heavily supported by their families, making rental prices independent of meager or nonexistent student incomes.
The Bad Stuff
Significant wear and tear
To make a sweeping generalization (and to reference every classic college movie ever made), renting to college students is hard on a property. Most students are living on their own for the first time, and dorms, with their concrete slab walls and furniture built to withstand the apocalypse, are more indestructible than the average rental unit. The college lifestyle, late nights, lots of stress, lots of alcohol to deal with the stress, and general immaturity, will leave lots of wear and tear on a unit. However, if you are a handy landlord who lives close enough to the property to handle repairs, the pros of renting to students may outweigh the broken windows, carpet stains, and that lingering smell of stale beer.
Summer vacancies and subletting
While students do take classes in the summer, lower course offerings and other priorities keep the student population lower. Many college students go home during summer break, or travel for internships and study abroad programs until school starts back in the Fall. Housing units are more likely to be empty during the summer, and the request for subletting is common.
Transient tenants with a need for short term leases
While a college town promises an abundant tenant population, the majority of renters are transient. College towns do maintain a base population of faculty and staff, but these people are more likely to own homes than rent. Students who attend for four years are likely to split their time between on and off campus housing, and those who move off campus are likely to move more often depending on roommates, financial situations, and academic priorities. It’s rare to find students who will sign more than a one year lease.
Definitely not a passive investment
Investing in rental properties in college towns can be a lucrative choice for a property owner who is comfortable with active maintenance of their units. However if you’re looking for a passive investment, it’s probably best to find a market where the potential renters are a little older, and less likely to try a keg stand.