If you’ve ever considered buying a house or apartment building as an investment rental property, think about doing so in a college town where you can rent to students. The potential for steady, top-dollar revenue is excellent, though there are risks.
Renting your investment property to college students means almost never having to worry about filling your units. Your business cycle is linked to the school year, so every summer you have students needing housing. The demand is always there.
Because the demand is consistent, rentals in a college locale can command 30 percent to 40 percent higher rent than units not near a university, according to Fortune Builders. Often you will be dealing with parents for payment, or the student may have scholarship or other financial aid paying the bill, so past-due rents aren’t as big of an issue as you might suspect.
Pro-tip: Higher rents and built-in demand, however, may mean a higher initial investment for you. Housing prices near a university are almost always higher than similar properties farther away.
Damage to the property is one of the most identifiable risks of renting to college students. Here’s a list of pitfalls and how to minimize them:
- Consider adding prohibitions to your lease agreement against specific behaviors like the use of fireworks, pellet guns, and burning candles. Have extra liability insurance, including an umbrella policy.
- To help cover potential damages when the lease ends, charge higher security deposits on the front end.
Include lease restrictions penalties on parties, noise and underage drinking.
- If your property has multiple units, hire a mature adult to live in one of the units as a supervisory presence.
- Require a cosigner, usually the parents or other guardians. Since you will have their contact information, establish good communication with the cosigner at the start of the lease in case problems arise later.
- Consider hiring a property management firm, which has the experience and expertise to manage these situations.
Offer only one-year leases. You don’t want your units empty for two to three months out of every year.
- Consider offering students individual leases per bedroom, having the cosigning parents responsible for only their child’s rent.