The pros and cons of real estate investments in college towns

College towns offer a steady stream of tenants, giving you a predictable rental income. They also have high tenant turnover and more wear and tear. Let’s look at the pros and cons so that you can make the right decision about investing in college towns.

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In the United States, many states offer great prospects for off-campus rental opportunities for both colleges and universities. The renter population is high in college towns and this could attract investors to buy more properties. With about 20 million students in college in 2020 alone, it’s hard to ignore the appeal of catering to this demographic. But how can you do that with the fear of students potentially damaging your property? Let’s look at the pros and cons of real estate investing in college towns. We’ll also share some tips on how to make the most of this for your needs.

The benefits and disadvantages of long-distance investing

Pros

Large population of renters

Each year, thousands of students gain admission into Universities. While some opt for dorm in the first year, many move to off-campus housing within walking distance to the university eventually. This increases the tenant pool in university towns.

Select a profitable rental property

Referrals

Every Fall, when the university starts, you’ll have a new set of tenants. The steady demand helps to ride out economic slumps and recessions. While the houses will have a high turnover rate, they also tend to be occupied again quickly keeping the vacancy low.

Very few places offer both cash flow and appreciation. How do you prioritize?

Low vacancies

Once you rent to a set of students, referrals become easier for the next year – word of mouth spreads, both good and bad. Both the employees and students are always on the lookout for the best houses around the colleges.

Local economy

Generally, college towns have a thriving community atmosphere. There’s a strong need for restaurants, bars, laundromats, and other basic and social amenities that keep the local community and economy going. College towns have a different vibe than a suburb. This attracts visitors and helps the local economy. The rents are likely to hold steady.

Is long-distance investing right for you?

Cons

Number of occupants

A typical house, which is rented to a family will likely have two adults and two kids. College housing on the other hand is for students, who typically end up in one or more housemates situations where people from different backgrounds live together. You may have more occupants than a typical rental. You are dealing with many people. On the bright side, even if one tenant doesn’t pay their rent, you’ll still get rent from other occupants to help pay your mortgage and cover your expenses.

How to quickly evict tenants for violation?

Wear and tear

The high tenant turnover rate causes more wear and tear than a typical family move in and move out. Let’s face it, college is when people get to have some fun in life before taking on the responsibilities of adulthood. When sororities and fraternities get together, things happen. Students can be unintentionally destructive at times. When they engage in physical fights, they might destroy some properties of the building during the process. Adversely, this will lead to an increased cost of maintenance. Therefore, you may be able to charge higher rent to cover your costs.

Is the tenant or landlord responsible for damages?

Tenants may not stay for long

Students are expected to spend at least 4 years in college before graduating. However, some students may decide to move to join a friend and share rent together.

Upkeep

Every time the tenants move out, you have to paint, repair damages and bring the house up to snuff to pass the test of the parents for the best place for their kids to live away from home. This takes time and money. Real estate investments in college towns are rarely a passive affair.

Use our free, easy to use online move-in and move-out checklist

Local regulations

Some locations require approval before you rent to college students. They’ll examine the condition of the property and give you a license. You must comply with maximum occupancy limits.

Inspect rental properties

What can you do to get a steady rental income and reduce property damages?

Lease

Write a strong lease. Do not allow sublets. As tenants migrate back home for summer break, they’d want to reduce their expenses by subletting the place to someone else. Another move-in move-out causes more damages unless you are providing a furnished unit.

Have parents sign the lease when possible, as quite often they take care of the children’s living expenses.

Property manager

If you do not want to deal with the hassle of high turnover, property managers can help you. However, keep in mind that any higher rent you may get will be offset by the increased expenses. HomeKasa offers you all the tools you need to manage your properties from one place.

What does a property manager do?

Qualities of a great property manager

Utilities

Unless your local regulations mandate that the landlord provide utilities, we recommend that the tenants pay for this. It’s fair for them to take this on so that they pay for what they consume. When water is free, the tap keeps flowing. Hey, what better way than this for the soon-to-be adults to learn some responsibility?

Summary

Students need a place to live. Student housing offers higher rents for the associated risks. Student housing is a great way to have a steady income pool, meet new people, and even reminisce about your life back in the day.

HomeKasa allows you to manage all your rental properties from one location. Manage multiple tenants, collect rents, and see how your portfolio is doing from one place. It’s free, get started now.

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