Looking to learn about investing in rental property in college towns? Is it worth the risk? These are all questions many property investors seek answers to, whether you are new to investing or have been investing in properties for years.
According to Statista, approximately $4.5 billion was invested in 2020 in the U.S. student housing market. With that kind of money invested, student housing off-campus has led to the notion that rental property in college towns is a desirable option.
As you can see, buying rental property in a college town has its share of benefits. However, it’s only beneficial if you know what you are doing because it’s not like a typical rental property.
In this article, we’ll discuss the following when it comes to investing in property in college towns:
- How stable college town investments are
- How such assets can be managed
- The pros and cons of renting to students
- If one or more tenants are beneficial for rental properties
- Picking the right property to invest in
The Stability of Investing in Property in College Towns
Although there is some fluctuation in the market, investing in property in college towns have the potential to be a good option. The economy surrounding a college or university tends to be more reliable due to the cash influx that colleges or universities can create.
Due to high demand, property rates are more stable in college towns, meaning you can set your rental rates at market value. According to Mashvisor, college towns often see low vacancy rates because of the continual stream of both college students and employees. While there can be ebbs in rental income during the holidays and summers, that can be easily offset by offering short-term rentals during those periods, aiming at overseas students and visiting professors. Or, as Mashvisor suggests, students have the option to sign for a one-year lease should they decide to stay on the property even during the summer months.
This can mean a good investment for both the student and property management. The student will save money due to the low vacancy rates, and management will know when students come and go.
Are College Town Investments Easy to Manage?
If you are looking for a passive investment, you should reconsider investing in a college town. Property investments in college towns are not passive investments. However, if your heart is set on investing in a college town, a way to make the investment easier is to use a property manager to help take care of the day-to-day issues.
Most college towns have a variety of property managing firms. These can act as excellent advisors for anyone wanting to invest in their college town.
However, if the expense is putting you off, consider hiring a well-organized student as your property manager instead. They can take care of advertising for new tenants, checking in on the property, and handling simple maintenance jobs.
The Pros and Cons of Renting to Students
Most students want a warm, cozy place to live and study while attending university. So, most of the time, students are great choices for tenants.
According to Statista, the average rent growth of U.S. student housing units from 2016 to 2019 was about 3.3% per year. This number is expected to grow in the coming years.
When renting to students, it is essential to have strict, clearly written tenancy agreements. Make sure they include references with their application. Also, having their parents co-sign the rental agreement for added surety is a great idea and will relieve your worries about not getting paid rent.
Renter’s insurance is a necessity with any rental property. The risk of damage comes with the territory of renting properties, meaning that it’s likely for appliances to break down. Keep some of the rental money earned aside for everyday wear and tear.
One Tenant or Many Tenants?
On the one hand, one student should be less stressful. You probably won’t get as many noise complaints from neighbors, and the wear and tear on the rental property itself should be minimal. However, if that tenant leaves suddenly or doesn’t pay their rent, this will leave you in a bind.
Renting to two or three students offers financial protection, in that if one tenant is late with paying their rent, you still have some money from your other tenants coming in. However, renting to more than one student usually requires a bit more property management and overall maintenance.
Choosing the Right Property Type to Invest in
There are several types of properties to invest in, and you can break down your choice into two main factors. The first factor is the sum you are willing to invest—this includes additional costs such as furnishings and management fees. Also, the price of property varies with distance to campus.
The second factor is rental property trends in the area you are considering investing. You will have to research these locally. In some college towns, students prefer multi-unit rentals where they share with their friends. In other college towns, students prefer single-bedroom apartments.
So, there you have it!
These are all important things to bear in mind when considering investing in a college town. Investing in property in a college town will not only gain you a sense of independence, but it can also make a good investment once you find the right property based on your objectives.
Remember: Be wise about your investment and due diligence on the property!