Should you rent your property to college students?
You cannot discriminate based on age, familial status, or any other protected class as outlined in federal, state and local law. As is true in any location, the key to being a successful real estate investor is recognizing an opportunity – some markets have different quantity of customers that others. Market conditions dictate how certain investments are maximized. One of the most underutilized strategies in Property Management is renting and tailoring your property to college students as an unending opportunity in your investment strategy, if the property is located around a facility of education.
Excluding the students who choose to live in dorms, most students seek off-campus housing during the duration of their academic stay. There are numerous economic benefits to renting out your property in a college town. While some landlords may be leery of accepting students as tenants due to lack of rental & credit history, with precautionary measures put in place, student housing may become a profitable source of revenue. Often leases can be structured around the school year, and rent prices can accommodate the changed timetables. Just remember, you can’t discriminate, and must treat all applicants with indifference. If you are marketing to a college community and a non-education affiliated individual/family should apply, they must be treated with the same level of acceptance as an applicant attending the local school.
Here are some of the pros and cons of renting your property to college students in Portland, OR.
Benefits of Student Housing
It’s a reliable Tenant Pool.
There is high demand for rentals by students who want to live off-campus and aren’t in the market for buying their own home. Each year brings new potential tenants as first-year students’ move out of the dorms into their off-campus rental.
Steady Rental Income
As demonstrated by many recessions, the rental market remains strong, and enrollment in colleges increased in spite of the economic regression and falling home values. Increased enrollment in college towns causes rental prices to increase based on demand. With almost every college student getting housing assistance for rent, investors often reliably collect rental income.
An increase in demand raises occupancy rates in college rental apartments. Landlords can take advantage of high demand by starting the leasing early to help student’s secure rental housing for the coming year, and can use 10 month leases instead of 12. This is a great strategy to eliminate an overlap of tenants who move out after the ‘college rush’ has ended as students secure housing before school starts. Communicate with your residents, it could be they love the place and plan to stay well beyond the first school year – financial incentives for long term tenants should be considered by wise investors.
For some investors with a storied connection to a university, it may be wise to purchase a home near a school. Often, investors may do so with the expectation that a child may stay in the home while attending. When the student no longer has need for the home, the investor can decide to rent the home out with the expectation of another family member occupying the home in the future, or they may simply sell the home. This strategy can often be more effective for long term return on investment: 1) student has secure housing and rental pricing can be limited to the mortgage expense – lower student loans. 2) investor can sell the home and recoup the increased value of the real estate – walk away with cash.
No Rental History, No Employment, and No Credit – Your typical tenant screening criteria will often render college students ‘conditionally approved.’ Even if a student works part-time, his income may be well below your minimum requirements. First-time renters will not have landlord references, and you may be dealing with a young student who hasn’t had the chance to build their credit or establish a track record of responsibility. Consider requiring a co-signer instead of higher deposits on a conditional approval when appropriate. Do not discriminate, and establish a process for your conditions rather than adjusting your leasing practices on a ‘case-by-case’ basis.
Increased Wear & Tear
Student rentals are notorious for accelerating wear and tear that goes beyond abuse, damages and deep cleaning. Students living on their own may not understand the value of maintaining and taking care of their home. Consider rent pricing as a method to offset risk potential.
A college student’s inexperience may create roommate conflicts that can develop into hostile living conditions. Your tenants may offer to help to solve their problem or think they can just move out before their rental period ends without realizing their legal commitment to their rental term. A Landlord has an obligation and financial interest in helping to mediate peace in troubled roommate situation; this can built tenant loyalty and trust in addition to reduced damages and broken tenancies.
Naive Maintenance Responsibilities
For some students who are renters, this could be the first time living on their own without their parents or dorm staff taking care of the maintenance. Simple things like regular cleaning, using appliances appropriately, changing a light bulb, or reporting maintenance issues could be a whole new experience for them. Make sure your tenants know what maintenance they are responsible for and who to contact the second a problem pops up.
Overall, renting property in a college area requires an active property manager. Property and tenants will require regular attention, so it is probably not the job for the landlord to sit back and not even think about their rental properties. If you’re the kind of landlord who likes the feel of a college town and are looking for a quick fix to put the property to significant use and make some money by renting, then a college town may be just for you.