Student Housing Is My Best-Performing Investment (But Yes, There Are Some Drawbacks)

Student Housing Is My Best-Performing Investment (But Yes, There Are Some Drawbacks)

4 min read
Ryan Deasy

Ryan Deasy, of Deasy Property Group and RentReddy, is a long-distance landlord currently residing in Houston, Texas.

Experience
Originally from Connecticut, Ryan has employed various strategies and studied unique niches in order to grow and manage his portfolio. In 2012, Ryan purchased his first duplex. Little did he know, he had stumbled into house hacking and from there, never looked back.

In 2016, Ryan moved to Houston and left all of his rentals behind—with no property manager. Through many trials and tribulations, he discovered the best way to manage his portfolio was simply by doing it himself from a distance. After employing rock solid systems and an all-encompassing team, he has been able to scale his portfolio without missing a beat.

Not only is his entire portfolio managed from afar but it is also comprised entirely of rent-by-the-room arrangements. With the appropriate systems and teams in place, Ryan has taken a group of small multifamily rental properties and made them into an exceedingly profitable income source.

Education

Ryan earned a bachelor’s in Finance from Central Connecticut State University.

Accreditations
Connecticut Licensed Real Estate Salesperson (former)
Licensed Insurance Agent – Life and Health

Press
Ryan has been sharing his knowledge and expertise throughout the BiggerPockets community for years but most recently has found great pleasure in adding value through the BiggerPockets Blog. Ryan also appeared on the Rental Income Podcast Episode 212.

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I used to have parties with 100 people at my college rental house. We were making a good profit charging $5 at the door, which paid for all the kegs, plus some. I am glad I do not rent to my college self.

We have all heard stories like this. We have all heard about the destruction that can ensue at a college party where naiveté meets alcohol. I even know a landlord that fully budgets to completely renovate the entirety of the inside of his rentals every single year. He replaces all furniture, TVs (yes he provides those), and sheetrock. I believe he actually uses every single bit of that budget each year.

For me, I have had the exact opposite experience. It has been nearly all great—but of course with some drawbacks.

Pros of Investing in Student Housing

Collecting rent on time has been much easier than with a non-student rental. Much of the time, the parents will co-sign the lease and/or just pay the rent themselves. If not, in my experience, these students do not have the time or patience to not pay the rent. If they are enrolled in school, the last thing they want is for me to be knocking on their door, threatening eviction or other recourses.

Close up photo of young happy students with books and notes outdoors. Smart young guy and girl in University campus. Learning and education for young people.

If they find a place they like that is well managed and close to campus, there may not be a need to ever find a different place during their school career. I have retained 60 to 70 percent of my students in one of my properties since I bought it in 2017. There has been another maybe 20 percent that left because they graduated, and the remaining number has left for a variety of reasons, including transferring to a different school and finding a different place to rent.

Related: Student Housing: What Investors Should Know About Pros, Cons & Profitability

On that same vein, the off-season can be tricky. If you are retaining your students like I am, winter and summer is great. There is virtually nobody at the house, so utilities are low. But tenants continue paying rent, so that when they come back, their housing is still secured.

Personally, I rent out everything by the room. This strategy has become synonymous with college rentals, although I also do it with non-college rentals. Either way, it is true that it is quite easy to utilize this method with college students.

With this system in place, you are able to drastically increase your cash flow. For example, one unit of mine is bringing in $1,575 where if I rented the whole unit to one person I would be looking at $1,000 to maybe $1.100. If you start to do this across multiple units, you will quickly see what it does to your overall cash flow.

Lastly, colleges rarely shut down permanently. When was the last time you heard of a college needing to shut its doors due to low enrollment and lack of funds to continue operating? Yes, it happens. No, it is not common.

Therefore, this fact may give you added peace of mind that your rents will continue to come in well into the future.

Cons of Investing in Student Housing

As I alluded to in my intro, destruction is a major concern. While I have not ever experienced this (knock on wood), I understand it is very possible. When I am taking applications and going back and forth in conversations with students, I am as clear as possible about what I expect from them (without being that lame, boring landlord that is going to be a total buzzkill). I tell them: This is a not a party house. I say, if you want to have people over, that is fine. But please be very cognizant of the drinking laws. I also say, I take great pride in the property I am providing, with the goal of giving everyone a safe and comfortable place to live.

student-housing

This talk has seemingly limited basically all destruction and partying.

Do not forget: Your college rental is, more than likely, not the only one in town. Thus, if your students are well-behaved, that doesn’t mean that your neighbors’ students are. I have had incidents of damage where, when a party let out down the street and everyone was walking back to their respective houses, students have caused damage to cars sitting in my driveway.

Related: 4 Vital Tips for Tapping Into the Lucrative Niche of Student Housing

For a lot of these students, this is their first time living on their own. Because of this, they are going to make a lot of newbie mistakes. For example, I have had frantic calls about the heat not working in the middle of winter. Come to find out, someone had accidentally hit the bright red “Furnace Off” switch at the top of the basement stairs instead of the switch to turn off the lights. I have also had a fire in the kitchen because someone was heating something on the stove and then laid down on their bed and fell asleep.

In general, these issues will start to phase themselves out as the years go by and as these tenants become more “experienced” in terms of living away from home.

This last one is the biggest con for me. It is frustrating being bound by the school year schedule. Yes, people are going to move in and out of your student rental. Problem is, if someone moves out in May, you may get a new renter to sign a lease in June. However, they are not going to move in until the last week in August, and that’s the next time you are going to receive any rent for that space. They are going to be living at home for free during their time off. Unless they do not have a home to go to, these months are going to yield $0 for you.

The Bottom Line

Overall, my student property is the best performing one I have in my portfolio. I highly recommend that you look into student housing if you know of a college that might have properties around it that are available. Between the added assurance with rent payments to the ability to rent out by the room, these properties can be true cash cows if operated correctly.

What’s your take on investing in student housing? 

Let’s talk in the comment section below.