School towns - good or bad?

Question

My daughter is going to school at ASU and we are paying for housing. I am considering buying a condo and having her roommates help for the next two to three years . Has anyone found college areas to be better investment experience or worst? It is close to the football stadium and thought we might be able to VRBO when our daughter graduates. I have always wanted to have rental property and I am already paying out 10k a year to the school

Thanks

Justin R. · Answer

@Ron Russell

I love student housing.

I invest in both college areas, and not. I was initially reluctant and had the same fears others here mentioned. Wear and tear, maintenance, kids, blah blah blah.

In reality these are the safest areas to invest. Strong local school driven economy, high rents (I rent by the room), 12 month leases, 4 students and their parents on the lease, deposits to cover the party damage.

Best part is once you rent out the house to students, it is perpetually rented indefinitely. In three years one student graduates and the remaining three recruit a friend. Next year two more graduate and do the same. It's usually continuous if you treat them well.

Michael Ealy · Answer

The answer is IT DEPENDS.

Generally investing in college towns is GOOD.

But, treat like any other real estate investment.

• You got to buy it a good price with at least 10% (preferably more like 20%) discount vs. its current market value; AND/OR
• The property has to cashflow (rent less all expenses); AND/OR
• The property has to be in the right area so it will appreciate over the long term. Generally, a college town is usually in demand and appreciates over time. However, it also depends on the college or university - if it's growing or in demand.

If you can't buy it at discount and it does not cashflow and there is very low appreciation potential, then, it's a bad deal even if it's in a college town.

Ryan Swan · Answer

@Ron Russell student rentals in Tempe have been my bread and butter business for the past 15 years. I actually "fell into" real estate investing because I wanted to stop paying rent in college and decided to get a house that I could rent to friends.

I firmly believe in renting near universities because of all the tangible benefits: constant tenant pool, predictable rent cycles, stronger local economy, and price/demand appreciation as the university grows and housing becomes more competitive.

There's a science to renting to students that I've perfected over the last many years. You need to know what to look for in the property, how to find "good" student tenants, times of year to market the property, how to set the start/end dates on the lease, and how to set expectations to minimize problems commonly associated with college age renters.

VRBOing the property when she graduates is a great idea, although tough to do with any condos/townhouses as most of the CCRs specifically forbid short term rentals.

Jon Hinckley · Answer

Hey Ron, my son is a freshman at Oklahoma State and he and I just closed on a rental property that has tenants until the end of May.  Our intentions were to rent until the end of the current lease, rehab and flip, but upon further analysis, we are rethinking the plan.  We are going to rehab and rent until he can move in and use his fraternity connections as a pool of potential renters.  We figure most of them come from financially solid backgrounds and he can market the property in a group text.  Once he can live there, the other 2 bedrooms will rent out at a rate to cover the mortgage and we can benefit from the 2-3% appreciation rate along with building equity in something that I can recover housing costs instead of paying the fraternity or university plus it's invaluable experience for him being a live in landlord.  On another note, people do VRBO houses in the area during football season so that could be a backup plan if necessary.  Good luck and Go Sun Devils!

James Canoy · Answer

@Ron Russell

It’s fine but make sure you get their parents to guarantee the lease so they don’t just move out or tear the place up

Doug McVinua · Answer

@Ron Russell I manage property in Tempe near ASU with students, overall it is working out well. One property is a 4 bedroom with 4 tenants that have been in place for 3 years. A couple have graduated and stayed as the group is friends.

I watch the property a little closer than some others but really don't have issues. I do tend to stick with upperclassmen and or grad students whenever possible so as to avoid the 1st year or two maturity issues.

One has a couple of younger kids (athletes) and I have the parents on the lease. Recently had a parking complaint on the tenants that I cc'd the parents on and the problem was solved very quickly.

The screening is a bit more involved but overall it's been good!

One word of caution would be to treat it as a professional and not just let your daughter move friends in and out on a whim. Not to criticize your daughter (I have 3), just that she might treat this a little different than you.

Tempe is very strong, between ASU and all the corporate activity the rental market is strong!

Kenneth Garrett · Answer

I have some student housing.  Make sure you have the parents co-sign on the lease for damages and rent.  This generally insures payments.  I have them sign a 12 month lease. It can be a great investment.  Have had both good and bad experiences.  Overall I think it’s a good plan.

Good Luck.

Brian Ploszay · Answer

Student housing is a specialty.  I personally think some of these places get a lot of "wear and tear."

I think Tempe is the town near ASU.  Solid place for sure.   A University often is a great anchor for a town.

Ryan Swan · Answer

@Justin Blue you should be closing on the property around end of May or early June, and then have it on the rental market soon thereafter. The housing market is getting more and more competitive, so most students are locking down their house for the next school year in early summer.

Justin Blue · Answer

Hi Ron,Just came across this thread and was interested to how you went with your purchase and investment to date?

We are moving to Tempe next year as my husband continues school full time and were looking to purchase there and house hack while he is studying.

Do you have any advice from your experience for us going forward?

Thank you!

Jasmine and Justin

School towns - good or bad?

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