Almost 20 million people will enroll in college for this school year, 40% of those people attending public universities will live off-campus and away from their parents. What that translates into is a monumental housing need for college students. From apartments to single family homes, millions of college students are actively looking for affordable off-campus housing. As a real estate investor, the temptation is strong to invest in student housing; however, there are a few things to know before you rent to college students.
Craig and Ivy Toquam of Minneapolis, Minnesota are seasoned real estate investors who specialize in renting to college students. With 11 properties and 25 units, they’ve learned the ropes of managing collegiate housing near the University of Minnesota Twin Cities. The Toquams offer their experience & advice to those considering renting to college students.
What To Know Before You Rent To College Students
Specialize In A Niche
Craig explains, “We rent to graduate students and our properties are high quality units. We find graduate students to be excellent renters. They are focused on the education process and bettering themselves.” According to the National Center for Education Statistics, there will be approximately three million graduate students this fall. Graduate students have already obtained a bachelor’s degree are working towards professional licensure and master’s or doctorate degrees. Craig goes on to note, “In our experience with graduate students, the cash flow is similar [to traditional rental properties].”
Screen Your Tenants
While every landlord wishes they had a crystal ball to determine if a tenant is ideal, no such tool exists; however, there are methods to screening tenants to prevent any problems down the road. The Toquams’ strategy is to “meet applicants in person at the property and get to know them thoroughly. It’s amazing what they will tell you if you ask a few questions and then let them talk. If they pass the first layer of screening, we have a third party do background checks. When you apply good screening standards and choose high-quality tenants, it shouldn’t be a problem.” In addition to formal applications, references, and background checks, landlords can request copies of an individual’s credit reports; however, some college students may have little to no credit history.
Draft A Thorough Lease
Whether you’re managing the property yourself or hiring a management company, the most critical element to protecting your investment is by having a thorough lease. It’s advisable to consult an attorney about a contract; however, Craig suggests, “Make sure that you specify no sub-letting in the lease [and] only allow 12-month leases.” As the landlord, it’s also crucial that each individual living in the property is on the lease. A thorough lease should address move-in date, lease expiration, deposit, rules, rent information, as well as how lease violations will be handled.
Prevent Damaged Property
One of the primary concerns many landlords have about renting to college students is the risk for damage, and Craig agrees. “Renting to undergraduate students is riskier,” he goes on to say. Often, undergraduate students will move several students into a home to ease the financial burden of rent & utilities, but the risk of damage increases. The Toquams’ solution is, “if your property is generic and has lots of bedrooms and you have extra time to invest in maintenance, undergraduates might work well as tenants. Remember to calculate how much your time is worth – high maintenance vs. low maintenance is not just a money issue.” In any case, whether you rent to graduate or undergraduate students, make sure you collect a security deposit and that it’s specified in the lease.
With a portfolio of college rental properties, Craig and Ivy Toquam have seen just about everything. Their biggest surprise in renting to college students has been that “they have a surprising amount of money to spend on a quality unit. We were much more frugal when we were in school.” They explain that initially, they made a rookie mistake: “In the beginning, our standards were too low for qualifying renters, but we quickly learned that it’s worth it to wait for the right tenant.” They explain the pros of renting to college students is “college tenants are often there for four or more years,” but concede there’s “slightly more risk of damage to the unit.”
Their suggestion to aspiring investors renting to college students: “Graduate students are more mature, incur lower maintenance costs, and generally stay for longer periods.” They also manage all the units themselves. Craig explains it “allows us to be careful about the tenants we choose.”
Find Your College Rental on Homes.com
If you’re a college student looking to rent, then visit our How-To section where we offer step-by-step guides on how to buy, sell, or rent. If you’re looking to begin your investment journey with college town rentals, then browse thousands of available listings on Homes.com.