Owning a rental property in a college town can be a serious asset, but it doesn’t come without its drawbacks. It’s important to know exactly what you’re getting into before you invest in college housing.
Below, we go over the pros and cons of renting to college students. With a steady stream of renters and a high level of demand, you might just find that student housing could be a profitable addition to your real estate business.
Benefits of Renting to College Students
Let’s start things off on a good note. There are plenty of benefits related to renting to college students. Take a look.
Reliable Pool of Tenants
One of the greatest benefits of student housing is that there is always a new pool of tenants to rent to. In a college town, you shouldn’t ever have to worry about finding interested renters as long as your property is in decent condition and within walking distance of the campus.
Consistent Rental Income
According to Fortune Builders, rent in areas surrounding universities can be 30 to 40% higher than rent for similar properties further from the school. Not only will you be making more per rental payment, but you can also be pretty sure that college students will consistently make their payments each month. Student aid and financial support from parents allow students to reliably make payments.
With demand in college towns so high, vacancies shouldn’t be a huge concern. What’s great is that property managers of student housing can start the leasing process months in advance. In many college towns, it’s customary to begin the leasing process as far out as February for lease start-dates in the fall.
Rental properties near universities pretty much sell themselves. The Balance shared that property managers of student housing spend less time on marketing because the amenities inherent to a college town attract renters naturally. Housing in college towns is competitive, so as long as you have a decent listing posted on a few relevant sites, renters will come to you.
Drawbacks of Renting to College Students and How to Mitigate Risk
We’ve given you plenty of advantages to consider. However, as you likely know, college students come with negative considerations as well. Let’s go over the cons of student housing.
Lack of Employment, Rental History, and Credit Score
The most well-known drawback of student renters is their lack of credentials. You probably won’t be able to screen college students the same way you would screen a traditional applicant. Even college students with part-time jobs probably won’t make enough to meet your minimum income requirements. Most are also first-time renters, so they won’t be able to provide landlord references.
In order to make sure a college student will make for a quality tenant, you should require a co-signer or guarantor. These people will be financially and legally obligated to pay rent and cover the cost of tenant-caused property damage. They’re typically parents or family members with a verifiable income and good credit. You should screen both the student renter and their co-signer to ensure they’re reliable.
Increased Property Damage
Because student renters are often living on their own for the first time, have more people over, and are just overall a little less responsible, it’s likely that your property will experience more wear and tear.
College students are also known for ignoring what can turn out to be serious maintenance issues. It may seem unreasonable, but even making a phone call to you, the landlord can be too much of a burden for these young renters. To mitigate this, it’s important to make it as easy as possible for college students to report problems when they do arise. A great way to do this is to use property management software. A platform that offers a mobile app will be a particularly great fit, this way, tenants can easily submit detailed maintenance requests that you can respond to quickly.
Unstable Life Situations
College students tend to be less settled in life than older renters. Their relationships are constantly evolving, they quickly move from one opportunity to the next, and they’re unsure of their path in life. All it takes is one fight between roommates for a tenant to try and break their lease to move out early.
As long as you have a strong lease that you stick to, hasty decisions to move out shouldn’t be an issue. Just in case, it is good to also have a sub-lease plan in place.
It’s no secret that college students like to party. Of course, not all college students throw ragers in their front yard — or heaven forbid their living room — but with their newfound freedom of living alone, they’re likely to push the boundaries and throw irresponsible parties. This can lead to even more property damage and disrupt the neighbors.
To combat irresponsible behavior, it is customary to include some kind of policy in your lease that addresses noise and quiet hours. Requiring renter’s insurance is also a good way to ensure your property is safe from the aftermath of college parties.
Student Housing Could be a Good Fit For You
We’ve gone over the most considerable advantages and drawbacks of renting to college students. As you’ve been able to see, there are pretty simple strategies to combat the risks of student housing. You should take all of these factors into account before investing, but you might just find that your rental business could benefit from a few properties in college towns.