Is investing in college towns dead?

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Is investing in college towns dead?

Stephen Jones
Rental Property Investor · IL · Member since 2019 · 285 posts · 137 votes

BP,

I am looking at a deal in a college town with an enrollment of about 12,000 people & a population of about 25,000 people. What are peoples thoughts on investing in college/university towns? IMO, our education system is slightly broken. If you are not in school to become a doctor, lawyer, engineer, etc. then it seems unwise to assume a massive student loan? A lot of employers now do not require degrees to be potentially hired. 

Another factor is that this particular college town, like many, is not near a major city (closest major city is 2 hrs). Any feedback would be appreciated!

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Kerry Noble JrPro Member
Investor · Indianapolis, IN · Member since 2018 · 2k+ posts · 1k+ votes
4y

I dont think investing near universities is dead at all.......and i agree with you on our education.....


I would simply connect with the university and the housing department.....see if they have an opportunities for student houses with private landlords.......my local university is always running over with enrollment at the beginning of the year and they were paying $500/mo per room at one point to house students.......

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  • Kerry Noble JrPro Member
    Investor · Indianapolis, IN · Member since 2018 · 2k+ posts · 1k+ votes
    4y

    I dont think investing near universities is dead at all.......and i agree with you on our education.....


    I would simply connect with the university and the housing department.....see if they have an opportunities for student houses with private landlords.......my local university is always running over with enrollment at the beginning of the year and they were paying $500/mo per room at one point to house students.......

    8Reply
  • Steven Foster Wilson
    Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
    4y
    Quote from @Stephen Jones:

    BP,

    I am looking at a deal in a college town with an enrollment of about 12,000 people & a population of about 25,000 people. What are peoples thoughts on investing in college/university towns? IMO, our education system is slightly broken. If you are not in school to become a doctor, lawyer, engineer, etc. then it seems unwise to assume a massive student loan? A lot of employers now do not require degrees to be potentially hired. 

    Another factor is that this particular college town, like many, is not near a major city (closest major city is 2 hrs). Any feedback would be appreciated!


     Have you looked at rentals in that area? I think it’s important to do the numbers and see how much your mortgage would be and how much you could get from rent. I have a property on The Ohio States campus and I never have problems renting it out or getting a good income.

    8Reply
  • Stephen Jones
    OP
    Rental Property Investor · IL · Member since 2019 · 285 posts · 137 votes
    4y

    @Steven Foster Wilson

    Where is your property in Ohio? Is it Columbus? Cleveland? Cincy? Those locations have huge population. This one, does not. 

    I have looked at rents in different complexes and I do think rents are stable but are still able to be raised, which is good. 

    1Reply
  • Stephen Jones
    OP
    Rental Property Investor · IL · Member since 2019 · 285 posts · 137 votes
    4y

    Also note, this is not student housing. It is just a multifamily complex that is located in a college town. I've met with the property manager and she claims that her residents are 50/50, both students and misc tenants. 

    0Reply
  • Steven Foster Wilson
    Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
    4y
    Quote from @Stephen Jones:

    @Steven Foster Wilson

    Where is your property in Ohio? Is it Columbus? Cleveland? Cincy? Those locations have huge population. This one, does not. 

    I have looked at rents in different complexes and I do think rents are stable but are still able to be raised, which is good. 


     My campus one is in Columbus. What holds your back from investing in a higher population area? The price to rent ratio here in Columbus and Cincinnati makes for great investments. Not to mention our appreciation has been 8% higher then the US national average, because of the high demand for affordable housing.

    3Reply
  • Stephen Jones
    OP
    Rental Property Investor · IL · Member since 2019 · 285 posts · 137 votes
    4y

    @Steven Foster Wilson

    No, what I'm saying is, the deal I'm looking at has a population of 25K and the nearest big city is 2 hrs away (Nashville). So the lack of population is what scares me a bit. 

    2Reply
  • Steven Foster Wilson
    Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
    4y
    Quote from @Stephen Jones:

    @Steven Foster Wilson

    No, what I'm saying is, the deal I'm looking at has a population of 25K and the nearest big city is 2 hrs away (Nashville). So the lack of population is what scares me a bit. 


     Honestly, I do not think I would invest. It’s important to look at where big business are choosing to set up shop. Example, here in Columbus we have Chipotle, Amazon, The Limited, Intel,  and etc. Because of this our tertiary markets are even exploding. Places that I grew up knowing to be areas that no one would want to truly be there are now properties that investors are wanting to buy.

    I always say if the numbers make sense then go for it. Here is the calculator I like to use, https://www.calculator.net/ren...

    6Reply
  • Stephen Jones
    OP
    Rental Property Investor · IL · Member since 2019 · 285 posts · 137 votes
    4y

    @Steven Foster Wilson

    Thanks!

    0Reply
  • Steven Foster Wilson
    Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
    4y
    Quote from @Stephen Jones:

    @Steven Foster Wilson

    Thanks!


     Anything I can do to help, I am always willing. 

    0Reply
  • Jonathan R McLaughlin
    Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes
    4y

    @Stephen Jones I’d look at

    The colleges annual reports and the endowment and articles on general fiscal health. Check US News and World Report.

    We will be facing a wave of college closures in the coming decade for demographic and other reasons. For the most part though, these will be smaller colleges (2k students) with low endowments, and heavy student debt to cost ratios.

    The small towns where a small college exists as the largest employer are in big trouble, feel free to PM or Post with the actual town and we can look at the college stats but this doesn’t seem to belong to that high risk category

    1Reply
  • Shane Kelly
    Real Estate Agent · Cleveland, OH · Member since 2021 · 383 posts · 361 votes
    4y

    In my opinion, I think the large colleges (like Ohio State University, mentioned above) will see less fall off than that of smaller universities. Something else to consider is what the university is known for. I think for similar reasons to that of what you mentioned, a liberal arts college will be hit harder than that of a nursing/healthcare school. Just because a school has cheap investment housing nearby doesn't mean that is a good long term rental property.

    2Reply
  • Wendell Clark
    Rental Property Investor · Frankfort, KY · Member since 2021 · 20 posts · 22 votes
    4y

    My suggestion is to be wary of investing in towns with only a small private institution.  Those institutions have a financial incentive to have their students live on campus.  So, therefore, your pool of potential renters decreases dramatically. Instead, my suggestion would be to look for cities/towns with a smaller population but still a public college/university in the area. These towns want to keep you happy because likely they don't have enough on-campus housing.

    2Reply
  • Zachary Belli
    Member since 2022 · 3 posts · 0 votes
    4y

    @Stephen Jones

    0Reply
  • Zachary Belli
    Member since 2022 · 3 posts · 0 votes
    4y

    @Stephen Jones I'm a new investor with little experience so take this response for what it's worth to you. I believe owning a property close to or in a college town would provide an excellent opportunity for a STR or flip. I would assume there would be a large need for rentals (long term or short) on the regular. I would be concerned with the schedule of the schools schedule (breaks and holiday for example). I hope this gives you something you haven't thought of yet. Best of luck.

    0Reply
  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    4y

    @Stephen Jones Nope! not deal if you do your due diligence and understand your risk threshold.

    Goodluck 

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  • Christopher Liu
    Rental Property Investor · Santa Rosa CA · Member since 2014 · 56 posts · 48 votes
    4y

    I very much like investing in college towns. It gives you another option to consider when reviewing a property in terms of the tenant profile you can go after. Not all college towns are created equal though. I wouldn't invest in a college town that relies solely on the university to survive. I think it's important to find college towns that have preferably more than one university close by and other attractions such as tourism or other industries. 

    0Reply
  • Mackenzie Grate
    Real Estate Agent · Ulster County, NY · Member since 2020 · 201 posts · 173 votes
    4y

    There are some interesting responses in this thread. Things I have never thought about. I generally don't invest in college towns because I'm looking for tenants with less turnover. College students swap out pretty much every year and that rehab cost to unit can add up if they aren't maintaining it well. With that being said though, if you are interested in that, and the numbers work, investigate the school further. Make sure it's finances are rock solid and that it has some sort of unique program will draw students in no matter what. If it is a small school, and the only employer in town, I agree that could be extremely risky. But if there is something that makes it stand out and draws in a very unique type of student for a specific program... maybe that would be different? Based on the information you provided, unless it's a phenomenal deal, I'd look at other bigger/ more stable markets for my first investment property.

    1Reply
  • Steve Olivier C.
    Investor · NJ · Member since 2015 · 20 posts · 12 votes
    4y

    Hi Stephen, investing in college towns can still go well at current market rates and ask prices, in examples i see: for instance with net month profit of $450 corresponding to 7% annual return cash-on-cash with conventional investment on the listed $225,000 property at 16 Downes St New Haven CT, located 7 blocks from Yale School of Medicine.

    2Reply
  • Bud Gaffney
    Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes
    4y

    Absolutely not. It's alive and well!

    1Reply
  • Stephen Jones
    OP
    Rental Property Investor · IL · Member since 2019 · 285 posts · 137 votes
    4y

    Thank you all for the responses! Love the feedback. This is definitely not my first deal, it is a larger multifamily complex (the biggest deal I would be doing to date) so that was the reason for my question. 

    1Reply
  • Joe Miller
    Real Estate Broker · Columbus, OH · Member since 2021 · 203 posts · 247 votes
    4y

    @Stephen Jones

    Best of luck with the deal! Let us know how it goes. 

    1Reply
  • Billy Smith
    Shawnee Mission, KS · Member since 2016 · 716 posts · 313 votes
    4y

    I looked at Lawrence KS is was  fully valued ,finding a deal would be a long labor intensive project so I back out .One thing I did notice students will rent dumps it's all about location to the campus .My son rented a real dinger 6 years back  real close to campus  the basement was so trashed the owner just nailed it shut .

    0Reply
  • Hoa Nguyen
    Edwardsville, IL · Member since 2017 · 80 posts · 44 votes
    4y

    @Stephen Jones

    Depending on the college, I wouldnt say dead, but highly competitive. In many cases you are not only competing with other investors, but also the schools who purchase properties for student housing. I am realtor, and just had a listing that was a 3 min walk from campus. The school outbid all other offers by almost 35k. Great for me, but sucks for the other offers.

    If you are looking to invest in those markets, door knocking and looking for deals off the MLS would be your best bet.

    0Reply
  • Dan Hellweg
    Real Estate Agent · Chicago, IL · Member since 2020 · 8 posts · 6 votes
    4y

    Focus on college towns that are more than just the college (and yes, this does make it difficult to acquire homes, i.e. Austin, Texas). Do some research on the area. Will you be able to rent to students during the year and Airbnb easily in the summer due to the area? Can you just Airbnb it all year because the college does so much (think Greek Life events, big sport events, general student events throughout, etc). Watch out for towns that are small and with small private schools; usually not much going on and overall populations won't generate what you want/need. Also, look to local industry in the area. If the college struggles for some reason, i.e., similar covid situation in the future, what's the outlook for your investment. Also---college housing in general is getting big investment. Remember, students only want to live on campus (unless forced to for longer) for their first year or two usually. Check this out: Blackstone Makes $13 Billion Student-Housing Bet https://www.wsj.com/articles/blackstone-bets-on-campus-housing-with-13-billion-acquisition-11650366000

    2Reply
  • Stephen Jones
    OP
    Rental Property Investor · IL · Member since 2019 · 285 posts · 137 votes
    4y

    @Dan Hellweg

    Thanks for the article man!

    1Reply
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