Buying rental property near a college?

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Buying rental property near a college?

Marty Gold
Carlisle, PA · Member since 2015 · 59 posts · 1 vote

I'm searching for my first rental real estate property and an agent sent me a few options near a college (about an hour from my house).  The enrollment of this college has been 9,000-10,000 annually over the years.   

I plan to view these properties this weekend.  And I wanted to do a bit of research on here before that time. 

Are there any negatives or positives to renting a property near a college (which historically only rents to college students)....different from positives and negatives of any rental property?

Are there any unique calculations or factors which I should take into account, different from what people use on a typical property?

And for those who may do this quite often, are there any favors which make one college better than another in terms of owning a rental property nearby?  I don't mind researching other colleges if this one isn't ideal by some data points. 

Thank you to all in advance for your help. 

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Alexander Zurn
Lender · PA · Member since 2016 · 214 posts · 140 votes
9y

@Marty Gold for college rentals you'll want to consider a few things.

1. The size of the college relative to the location of the property. Is it within walking distance? How many minutes? If not, how long is a drive? Are most student houses the same distance?

2. $500 a bedroom can be considered high or low but the numbers are likely better run considering each bedroom to be x amount. You can figure that out by searching local rentals and dividing by the # of bedrooms.

3. Consider the colleges off campus living policies. Do they allow it? Are they increasing it? Cutting back on it (i.e. making it harder for students to be approved off campus)? Search the schools "off campus living policies" and something will come up

4. If the college were to dismantle, would the town itself support the rentals? i.e. is the school the only thing in town?

College rentals are certainly different and they can be either good or bad, depending on how your manage the property. I suggest listening to a BP Podcast on college rentals. I forgot which number it is but a simple search should suffice.

Good luck!

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  • Alexander Zurn
    Lender · PA · Member since 2016 · 214 posts · 140 votes
    9y

    @Marty Gold for college rentals you'll want to consider a few things.

    1. The size of the college relative to the location of the property. Is it within walking distance? How many minutes? If not, how long is a drive? Are most student houses the same distance?

    2. $500 a bedroom can be considered high or low but the numbers are likely better run considering each bedroom to be x amount. You can figure that out by searching local rentals and dividing by the # of bedrooms.

    3. Consider the colleges off campus living policies. Do they allow it? Are they increasing it? Cutting back on it (i.e. making it harder for students to be approved off campus)? Search the schools "off campus living policies" and something will come up

    4. If the college were to dismantle, would the town itself support the rentals? i.e. is the school the only thing in town?

    College rentals are certainly different and they can be either good or bad, depending on how your manage the property. I suggest listening to a BP Podcast on college rentals. I forgot which number it is but a simple search should suffice.

    Good luck!

    3Reply
  • Marty Gold
    OP
    Carlisle, PA · Member since 2015 · 59 posts · 1 vote
    9y

    @Alexander Zurn

    Thank you so much for your helpful reply. 

    1.  The property is 2 blocks from campus. 

    2.  I have not tried this method but will do this to find comparable pricing already on the market for this college.  In a somewhat related comment, I have pondered if it's smart to find a place which has maybe 4 bedrooms and try to add one or two more.   Or maybe find a place with 6-7 bedrooms and create more of a study room or lounge space.  Do either of these ideas sound more logical for a college environment?

    3. I will search for this, thank you. 

    4.  This is mostly a college town. 

    I listened to BP podcast #195, is that the one you were thinking about or may it be another one?

    Thank you again.  

    0Reply
  • Teddy Smith
    Real Estate Broker · Wilmington, NC · Member since 2016 · 236 posts · 126 votes
    9y

    Pros: You usually receive a higher rate of return with college rentals. There's tons of investment opportunities near colleges. Positive outlook with people going to college more and more.

    Cons: Lots of wear and tear since college kids don't know how to take care of a house and they can be destructive.

    1Reply
  • Marty Gold
    OP
    Carlisle, PA · Member since 2015 · 59 posts · 1 vote
    9y
    Originally posted by @Teddy Smith:

    Pros: You usually receive a higher rate of return with college rentals. There's tons of investment opportunities near colleges. Positive outlook with people going to college more and more.

    Cons: Lots of wear and tear since college kids don't know how to take care of a house and they can be destructive.

    Thank you.  Are the rates of returns in the college towns higher because of students driving up the prices, or are rates of return higher on rentals in the college town even if the property tenants aren't student focused? 

    0Reply
  • Teddy Smith
    Real Estate Broker · Wilmington, NC · Member since 2016 · 236 posts · 126 votes
    9y

    @Marty Gold There's more demand and students are willing to pay a hefty premium live near campus. My theory is that parents are likely paying the rent also so there's way more purchasing power going on.

    This isn't always the case though so make sure to do good due diligence.

    0Reply
  • Marty Gold
    OP
    Carlisle, PA · Member since 2015 · 59 posts · 1 vote
    9y
    Originally posted by @Teddy Smith:

    @Marty Gold There's more demand and students are willing to pay a hefty premium live near campus. My theory is that parents are likely paying the rent also so there's way more purchasing power going on.

    This isn't always the case though so make sure to do good due diligence.

     Great advice. Thank you. 

    In your opinion would it be better to buy a college rental which is 2-3 blocks from campus or one which is a bit of a walk from campus but situated next to many of the bars/restaurants?

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  • Susan Grinde
    Investor · East Wenatchee, WA · Member since 2016 · 44 posts · 46 votes
    9y

    We have a couple nicer rentals near a college campus in Montana. We have very low vacancy rates. I would recommend a couple things. First, we have parents co-sign with the students. This tends to put the more responsible students in the home. Also, try to buy as close to campus as you can. Students would rather not have to drive. Gas and parking fees add up. Because location is key to student rentals, you may end up spending a little more for a rental, but keep in mind you may be able to charge a little higher rent. 

    We really have never had any student destroy any of our rentals, but we make sure the materials used in a the rentals are pretty student proof. Granite counter tops and plush carpeting have no place in a student rental. Look for hardy materials like Formica and vinyl. Even the engineered flooring holds up pretty well. Sturdy can still be easy to clean and stylish.

    Also, look for a place that has a small, low maintanence yard because I don't think students have the time or interest to keep a yard maintained. Or you could hire a lawn care professional.

    I have other thoughts, but for the most part we love student rentals. Best of luck to you!

    3Reply
  • Brandon Hamilton
    Rental Property Investor · Morehead, KY · Member since 2013 · 5 posts · 1 vote
    9y
    I suggest the podcast with Bill Syrios... I can't remember what number it was. I corresponded a little with him after the podcast and he really had a lot of good pointers. I have been investing in college rentals for almost a couple of years in Kentucky. We love them. Like any type of investing there are pros and cons. In our area rooms go for 300 to 350 per room. It is according to how close to campus. I love the demand. I purchase a house, then while I am renovating, I put a sign up that says coming soon. Usually the home is rented a month before I finish. My 3 houses that are 1 block from campus have a waiting list. I screen all tenants and anyone under 21 must have a parent cosign. I also make all students sign roommate agreements stating that no matter of any conflict between roommates the same rent is always do. Seems to work for us. Being a college town does not mean just students. We have professors, students, and one of my rentals has a coach. The problem we have is you have to find houses before they get on the market. Because once they do the price is ridiculous. Everyone is different... normally in college rentals, the homes are set up different. The more rooms the more you make. Yes that can be true, but I have 2 five bedrooms, 1 three bedroom, and 1 two bedroom. Yes I do have a waiting list, however I have found I deal with more drama on the five bedrooms. Usually 2 or 3 students can get along. It can be hard for 5 students to always like each other. I am dealing with a situation right now where 1 of the 5 is causing problems and the others are searching for a replacement. Good luck.. I am still very new to this, but I really like this type of rental. The main thing with college kids is I don't give in. Be tough from day one. It is easier to soften up later than it is to get tougher.
    1Reply
  • Teddy Smith
    Real Estate Broker · Wilmington, NC · Member since 2016 · 236 posts · 126 votes
    9y

    @Marty Gold In my experience, the closer to campus the better (and the better appreciation too). The bars would be the "cherry on the sundae", but I think most students want the convenience of walking to class.

    0Reply
  • Adam Petterson
    Investor · Saint Paul, MN · Member since 2017 · 55 posts · 21 votes
    9y

    @Marty Gold being a recent college graduate, most students are looking to get as close to the college as they can. Remember that many students may not have a car, but still want the ability to live off campus. College rentals are a great opportunity if you buy at the right price. In my area I believe that the sweet spot is 3-4 rooms with 2 bathrooms. The second bathroom is a huge feature to have and many students (or their parents) will pay a nice premium to have two showers. As Brandon said above, the bigger the house, the higher the potential for roommate issues and drama. 

    The main drawbacks I have with college rentals is the amount of wear and tear that the students put the house through, and the fact that they may only occupy the house for a year. If you are paying a property management company to place a new tenant every year it can get expensive.

    If you have any questions feel free to respond or send me a personal message. While in school, I rented 2 different properties in a college area, and currently am debating purchasing a rental property in a student area as well.

    1Reply
  • Stephen Masek
    Investor · Mission Viejo, CA · Member since 2012 · 627 posts · 204 votes
    9y

    College rentals are a good thing to explore and we will be studying them (and apartments) this year. The closest we have come is being ready to buy one with four girls in it and parents co-signed, but the seller had failed to pull it off of the MLS after his partner decided to buy it.

    0Reply
  • Brandon Hamilton
    Rental Property Investor · Morehead, KY · Member since 2013 · 5 posts · 1 vote
    9y

    Adam has a good point about the wear and tear.  I have found a way to work this at an advantage.  I have heard numerous complaints from students on how bad their last property was.  They like my rentals because they are built like tanks.  When renovating I may pay a little more, but I use top quality almost always reinforced material.  Yes there are going to be problems but I try to do thing up front.  I look at thing in a way that I say.."what would be the more maintenance free solution".  For example on hvac I use a lot on mini split systems.  It lets each individual maintain there own preferred air temperature.  And guess what... if they call and say my heat is out I know that they will be ok until I get there the next day because there is other heat sources in the house.  I have found these things have given me a better reputation than my competition.  That is why renters I have now have already recommended me to friends or family that may need a rental in the future.  My only problem now is I need more rentals!  I have some property about 1 block from campus that is getting ready to get 4 more houses.  It is zoned for single family only but who cares... big demand.  This is not my only job.  But you can tell that it is the most enjoyable to me.

    0Reply
  • Fred Heller
    Real Estate Agent/Property Management · Houston, TX · Member since 2014 · 1k+ posts · 827 votes
    9y

    I've had the pleasure of moving around a lot for my job. And the thing I've noticed about college towns is that the rents are either very high (Ann Arbor, I'm looking at you) or very low.

    0Reply
  • Scott Matthew C.
    Real Estate Broker · MI · Member since 2014 · 594 posts · 183 votes
    9y

    @Brandon Hamilton it's interesting you require a co-signer for anyone under 21. Have you had any pushback with that requirement? All the best!

    0Reply
  • Brandon Hamilton
    Rental Property Investor · Morehead, KY · Member since 2013 · 5 posts · 1 vote
    9y

    No pushback at all....  If you are a college student under 21 you are more than likely a Freshman or Sophomore.  Which is usually very inexperienced in the rental department.  The biggest thing is all 4 of my properties have a waiting list.  If you don't meet my terms than there are plenty others that will.  Same thing with applications.  I have been told that I am one of the few that requires an application for college students in our area.  My thought is if you don't want to provide an application than I will move on to someone not trying to hide themselves.   If you are not strict in the college rental market than you are setting yourself up to get taken advantage of.  I have one house now that has 5 Freshman.  They everyone brought one parent to lease signing to cosign.  I told them after 2 years of good experience I will release the cosigner.  I know I am not an expert, but I am learning what works for me.

    0Reply
  • Marty Gold
    OP
    Carlisle, PA · Member since 2015 · 59 posts · 1 vote
    9y
    Originally posted by @Scott Matthew C.:

    @Brandon Hamilton it's interesting you require a co-signer for anyone under 21. Have you had any pushback with that requirement? All the best!

     Could this be a legal problem for discriminating a 19 year old who has a part time job while in school?

    0Reply
  • Brandon Hamilton
    Rental Property Investor · Morehead, KY · Member since 2013 · 5 posts · 1 vote
    9y

    I worked at a bank for several years.  Chances are a 18 or 19 year old does not have a lengthy job history or any job history.  If you have not established a credit history or maintained a job for any length of time then they will need a cosigner.  Everybody is quick to play the discrimination card these days.  I have the right to chose for my property.  If I don't think you can pay the rent and you don't have someone on the lease that qualifies than I go to the next one in line.  Would you rent to a Kid fresh out of High School?  Should I not require credit checks and background checks, because I may judge that person?  

    0Reply
  • Michael Wu
    Queens, NY · Member since 2017 · 43 posts · 7 votes
    9y
    It depends. If your looking for easy rental, then prepare for 8-15 students per house. Usually, the house won't last too long if you aren't managing well cause parties will cause destruction easily.
    0Reply
  • Jessica Wygal
    Real Estate Agent · Cypress, TX · Member since 2018 · 156 posts · 73 votes
    8y

    @Adam Petterson did you ever jump in and purchase a college rental property?

    0Reply
  • Kanesha Roser
    Member since 2018 · 1 post · 0 votes
    8y

    Housing near the college is cool and comfortable. Housing near college saves time on the road. Free time can be used to do useful things - such as learning how to write texts. Finally, I want to say that housing near the college is convenient and solves many problems.

    0Reply
  • Juan Cortes
    Member since 2019 · 3 posts · 0 votes
    6y

    @Brandon Hamilton @Teddy Smith @Susan Grinde @Alexander Zurn given the amount of potential colleges in the U.S. what factors did you consider to determine the target university?

    Right now I am looking at colleges in the Northeast and am looking at several factors: Current Size (and growth over time), Distance, if it is not a commuter school, off campus housing policies and public vs. private university.

    Do you recommend any other indicators I look into and where to best find this information? 

    Thank you for all of your help, this feed has been extremely beneficial!

    0Reply
  • Juan Cortes
    Member since 2019 · 3 posts · 0 votes
    6y

    @Brandon Hamilton @Teddy Smith @Susan Grinde @Alexander Zurn given the amount of potential colleges in the U.S. what factors did you consider to determine the target university?

    Right now I am looking at colleges in the Northeast and am looking at several factors: Current Size (and growth over time), Distance, if it is not a commuter school, off campus housing policies and public vs. private university.

    Do you recommend any other indicators I look into and where to best find this information? 

    Thank you for all of your help, this feed has been extremely beneficial!

    0Reply
  • Juan Cortes
    Member since 2019 · 3 posts · 0 votes
    6y

    @Brandon Hamilton @Teddy Smith @Alexander Zurn given the amount of potential colleges in the U.S. what factors did you consider to determine the target university?

    Right now I am looking at colleges in the Northeast and am looking at several factors: Current Size (and growth over time), Distance, if it is not a commuter school, off campus housing policies and public vs. private university.

    Do you recommend any other indicators I look into and where to best find this information?

    Apologies for the repeating posts, it's my first time posting and I did not know how to properly @ someone. Thank you for all of your help, this feed has been extremely beneficial!

    0Reply
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