Opinion on Buy & Holds in College Towns

66 Replies

Morning, 

Just wanted to get some opinions on how you all feel about buy & holds in college towns. I view these properties as MF even though they are technically SF. However, when renting to college students you are able to charge rent to each person that would potentially live in the home. When renting traditional SFR you get all of your rent from a single family.

How many of you have rented to college students? How would you describe your experiences if you have? What strategies do you use to combat the 3 month dead period from the end of one school year to the next? 

- Jeffrey 

I am interested in this strategy as well - the comfort of having a parent co-sign, the student gets the freedom of living with friends and typically paying less than a dorm costs... My husband and I are focusing in on nearby college neighborhoods. I am interested to hear others opinions or experiences. I met with a property manager that manages these types of homes and he said typically one student will find the apartment and then gather the rest of their friends to move in so it makes finding tenants less difficult if you have one on the hook. 

@Jeffrey Sealy I've always wondered about this as well especially if you can connect with the college and have them use you as a source for housing. Hopefully someone with some experience can chime in. 

@Jessica Costa

That's how I did it in when I was in graduate school. Found a house that was within reasonable driving distance to campus and then reached out to other people who were in the same program as me until it was filled up. It was significantly cheaper to live off of campus than it was to live on campus. 

@Alex Price

Exactly! It's definitely easier to establish that connection in a town with a college that you attended. Regardless, if you can find a way in and keep tenants flowing through my opinion is why not? 

I have not targeted college students as tenants because of high turn over and vacancies during the summer.

Originally posted by @Anthony Dooley :

I have not targeted college students as tenants because of high turn over and vacancies during the summer.

 What do you think about Airbnb or short term rental conversion during summer? 

Maybe have a two tiered system for rent?  Perhaps maybe charge $50 more a month for a nine month lease?  I am not sure. I think that is a bad idea.  But I am interested in the answer as I am looking into two college towns.

Originally posted by @John Peine :

Maybe have a two tiered system for rent?  Perhaps maybe charge $50 more a month for a nine month lease?  I am not sure. I think that is a bad idea.  But I am interested in the answer as I am looking into two college towns.

 We were on the hook for the summer months at the house that I lived in while at school. It was either find a sub-lease or pay up. 

@Alex Price that may work if you live in a vacation destination, but the typical multi-family building would probably not appeal to a family on vacation.

@Anthony Dooley Not necessarily. I believe it all depends on what's nearby and what your city caters to. I live in Cleveland which has a lot of professionals in and out of town, in addition to the many events that go on here. For instance one of the top colleges in Ohio is here (CWRU) and it's right next to US hospital system, performing arts and not far from Cleveland Clinic. Those may excellent airbnb prospects in addition to short term rentals. Also there are many students grad students who do attend school over the summer for summer programs. I think it's all about location in which I would inquire about it all before investing. 

I have never been a college landlord, but I have been a college tenant. The first thing that semi confuses me about this post is that people keep talking about "9 month leases". Is that how it is now? I went to Liberty University in Lynchburg VA, and Radford University in Radford VA and I always rented for the entire year (as did everyone else I knew). I've actually never heard of anyone only renting for 9 months unless it was a SPONSORED campus housing. I don't know why anyone would ever even offer that. Kids typically like the year long leases because they don't have to pack up all of their stuff and vacate the dorms at a certain time.

Being as though I was recently a college student I feel like a 9 month lease (with turnovers) would be an absolute nightmare. I will say, as long as student loans exist, there is a huge market for college rentals. I went to both private, and public institutions and I saw how common it is for students to pay their rent with portions of their student loans. In fact, a former roommate of mine paid 6 months in advance. 

I'm a big proponent of college rentals. Most of you are going to disagree with me on this one but especially to Sororities (and sometimes Fraternity's).

@Eric G.

All the leases I had to sign in college were 12 months, but you never know depending on the owner... I would only do 12 month leases.

I definitely completely agree with your comment. Sororities and Fraternities can provide you with a constant flow of tenants as long as they are recognized on campus. 

@Eric G. brings up a really good point that more people are concerned about lately. Student loan debt is over $1 Trillion and there is more talk of online education, "free college" from government programs, and Vocational Trade Schools.  There are many discussions trying to make sense of a 4 year degree these days, since the big income jobs straight out of school do not always materialize. This may be 10 years down the road, but colleges will need to change their business model in the future.

Originally posted by @Jeffrey Sealy :

@Eric G.

All the leases I had to sign in college were 12 months, but you never know depending on the owner... I would only do 12 month leases.

I definitely completely agree with your comment. Sororities and Fraternities can provide you with a constant flow of tenants as long as they are recognized on campus. 

 I think people who weren't involved in Greek Life just see Fraternities and Sororities as party animals but it can actually be quite the opposite. I was in a Fraternity at Radford University. First of all, a Fraternity CHAPTER house is usually a place for organizational meetings and ceremonies all of which don't involve excessive drinking. That's usually the house the National reps visit and tend to be very strict on policy. Most of the raging parties Fraternities hold are off location because it's really easy to get kicked off campus if you have a strict Greek Life committee at your school. That's not to say people won't have events at the house, because they will, but are typically well maintained. Fraternities usually like to add history to their houses by holding them for LONG periods of time cutting out on turn over costs. You can always guarantee the house will be filled by members even if one graduates. Lastly, Fraternities carry their own national insurance which at times can cover a lot of personal injury ON your property. We did have an incident once during a Fraternity Sponsored event (someone fell down stairs) and same was covered by our National insurance policy.

PS: Not saying that I haven't seen raging parties at Frat houses but if you're in a college town you're guaranteed to at least run that risk regardless.

I have a single family 5 bedroom 3 bath property I rent to college students.  It's been a great rental for me  - other than a striper pole going through the ceiling twice :/  I can charge higher rent because it's based on room rental.  I have them sign 12 month leases.  It's fairly normal here to do so even for students.  I have their parents co-sign on the lease as well.  I'm renting to some frat boys now that have been super great.  

@Jeffrey Sealy Year leases are standard in my market of Columbia, South Carolina. I'd check with some local landlord and property managers to confirm what the standard is in yours. 

I own about 50 student rental units and covered several of the pros/cons in this thread. Great insight from other college student landlords as well.

https://www.biggerpockets.com/forums/52/topics/491...

Originally posted by @Anthony Dooley :

@Eric G. brings up a really good point that more people are concerned about lately. Student loan debt is over $1 Trillion and there is more talk of online education, "free college" from government programs, and Vocational Trade Schools.  There are many discussions trying to make sense of a 4 year degree these days, since the big income jobs straight out of school do not always materialize. This may be 10 years down the road, but colleges will need to change their business model in the future.

 Great point, Anthony. A student loan crisis/recession/bubble is the biggest long term threat to my student rental business. I don't see how it's sustainable.

I focus specifically on investing in student rentals in New Brunswick for Rutgers Univ. I wear several hats in that area including managing property (property manager) and being a realtor. You have to know your area and know your market. Our Leases are 12 months, most kids want to subLease in the summer. Some landlords rent it by the room (which frankly, I think is foolish because you turn it into a boarding house. It should only be done if it's a late period to rent). I put all tenants on one Lease and collect one check each month. Treat them like adults and they will act like them. It has it's Pros and Cons

Pros: Cash Flow, Being surrounded by young people

Cons: High Turnover, Immaturity, Drama

I personally love doing it but it's not for everyone and you have to be STRICT. I want to have the largest student rental property management business in my area and it's slowly trending in that direction. Will above me knows his stuff real well, but I am also happy to answer any questions folks have. 

Amen to everything @Peter T. says! You must be strict with students. They will respect boundaries but you have to enforce them. We routinely have months where we have 100% on time rental payment (~150 students) because they know we are serious about late fees.

@Peter T.

Just out of curiosity, what kind of returns are you making on your college rentals here in NJ?  Also, what are you budgeting for repairs and cap ex...  Are they typically higher because of some of the cons you mentioned above?

I rent to college kids and it has been great, my current tenants have been in there nearly three years! I always have them sign a 12mo lease (June-May).

Originally posted by @Christopher Giannino :

@Peter T.

Just out of curiosity, what kind of returns are you making on your college rentals here in NJ?  Also, what are you budgeting for repairs and cap ex...  Are they typically higher because of some of the cons you mentioned above?

I typically budget 8% combined for repairs and capex. Has been pretty accurate over the past few years I have done it for myself and my clients. Now you might argue that's low but I think too many people get caught up in BP formulas and price themselves right out of lucrative markets. Obviously will depend on the area you are in, age of home, etc.  

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