Property Investing Guide: Buying a Rental Property in a College Town
Investing in College Town Rentals? Here’s What You Need to Know
Diverse culture, active food and nightlife scenes, and an influx of new residents: these are classic characteristics of just about any college town. With an ever-present abundance of potential tenants, a college town could provide a lucrative real estate investment for potential landlords.
However, despite the alluring benefits a town and property may offer, it’s important to fully consider both the benefits and the drawbacks of renting in a college town. So before you dive into purchasing a rental property in a college town, weigh the following pros and cons to help you make sure this is the right investment for you.
Pro: A Seemingly Never-Ending Supply of Tenants
The top priority for a landlord? A tenant. As each school year ushers in a new freshman class, college towns will consistently have a student population looking to find off-campus housing. Whether it’s a student looking to reduce his or her rental costs, or a group of friends eager to experience independence, each semester there will be a pool of prospective tenants searching for housing.
Pro: Low Vacancy Rates
Along with a readily available group of potential tenants, in a college town, you’ll find few vacancies. Many landlords fear that the property will exact a high cost by remaining vacant once former tenants move out; however, in a college town, units will rent quickly as students are eager to settle on a housing situation before the next school year begins.
Often, if you have students renting a home who are moving out, they will have friends that are eager to fill the place next. In a college town, you can expect to pay very little to hold and market your home, because the area and student population will sell the space for you.
Pro: Offset College Costs
If you have a child attending school in a college town where you decide to purchase property, then buying a home can also benefit you by off-setting dorm and rental costs. Remember: on-campus living costs can range from $7,000 to $15,000 a year, in some situations costing upwards $60,000.
Rather than pouring money into dorm rooms or other rentals, you can redirect those payments into a rental home that you purchase. Save money in the short term by offsetting your child’s living costs, and make a long term investment by buying a college home.
Con: Tenant Turnover
With there aforementioned benefits of purchasing a rental property in a college home, you may be ready to jump at making an investment. However, there are a couple other factors you should also consider. Namely, tenant turnover.
While you can easily find students who are eager to rent your home, summer internships, study abroad trips, and graduation often cause students to part ways from the college town. As a result, a landlord in a college town will often experience high rates of tenant turnover. If you don’t live in the vicinity of the college town, this could prove difficult for purposes such as: collecting final month’s rent, vetting new candidates for the home, conducting a final walk through and inspection, and so forth.
However, in a college town, you’ll likely be able to hire a local management company for turnover fix-ups and rental transitions. If you don’t mind overseeing this process, then with the help of a management company, the high turnover rates may not be an issue for you.
Con: Active Engagement
Additionally, it is important to note that maintaining a rental property in a college town requires active engagement. Your tenants may not have previous experience renting a home, there will be high turnover rates, maintenance requests will come in, you may have to mitigate complaints with neighbors and other tenants, and together, these factors make renting a college town home a commitment.
So whether you decide to be readily available to address needs, changes, and concerns, or if you opt to hire a home manager, be aware that renting your college town home is not a passive investment.
Make an Informed Decision
If you’re aware of the high level of investment and management, or you’re comfortable out-sourcing responsibility, then purchasing a rental property in a college town could be an opportune real estate investment. Whether you’re interested in a rental to generate income, to contribute to retirement, or to save money on your child’s college rent costs, be sure you’ve considered these pros and cons, and then make the best decision for you.
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