I am an investor recently joined to biggerpockets and looking for any suggestion to pick college town rental opportunity with appreciation down the line.
I can only speak for more than my local area which is the home of the University of Illinois and would be classified as a classic Big Ten college town. we have seen over the past 5-10 years a large influx of investment. Our enrollment numbers have increased over the past 5 years but I would say the number of "beds" coming online every years are 3 to 4 times that of enrollment. This has shifted the market substantially. 10 years ago the vast majority of students would sign leases in Sept and Oct for the following school year which started in Aug. Now many students wait till the Spring and Summer to sign and have plenty of options with incentives like no security deposit or 1st months rent free.
I would strongly encourage you to sit down with a local investor for the market(s) that you are interested in and get a lay of the land. I am sure there are still great of markets with opportunity but for my 1 data point here in Champaign Urbana many of the experienced investors are pausing or even selling properties till things cool down a bit.
I can only speak for more than my local area which is the home of the University of Illinois and would be classified as a classic Big Ten college town. we have seen over the past 5-10 years a large influx of investment. Our enrollment numbers have increased over the past 5 years but I would say the number of "beds" coming online every years are 3 to 4 times that of enrollment. This has shifted the market substantially. 10 years ago the vast majority of students would sign leases in Sept and Oct for the following school year which started in Aug. Now many students wait till the Spring and Summer to sign and have plenty of options with incentives like no security deposit or 1st months rent free.
I would strongly encourage you to sit down with a local investor for the market(s) that you are interested in and get a lay of the land. I am sure there are still great of markets with opportunity but for my 1 data point here in Champaign Urbana many of the experienced investors are pausing or even selling properties till things cool down a bit.
Who do you want for a tenant(s)? If you buy a house, please know that you'll have couch surfing in the undergrad community and your property will take a beating. Inexpensive condos draw more serious students who don't want roommates - and 2/2 units are attractive with medical students who are on "weird" schedules and sleep, study, repeat is the way of life. I like renting to college students but I never invest in houses due to the upkeep and liability that comes from the partying side of college life.
@Scott Dixon and @Patricia Steiner, with your college rentals do you ever include utilities? I'm currently looking into a student housing system with an engineering/tech school where terms are 3 months on (in school) and 3 months off (at work). you end up with an A/B term where a group of students live in the house for Spring/Fall and Winter/Summer. As a result no one tenant is in the house for 12 months straight and utilities fall on the land lord.
what are your thoughts on something like this? any creative solutions?
Matt, I'm so glad you are thinking this utility issue through. So many investors have been taken advantage of by tenants who keep the AC at 65 degrees and allow all their friends to do laundry at their unit. A couple of thoughts:
1. Give a utility allowance. The rent is "x" and includes "x" in utilities. Should the utilities exceed that allowance, reimbursement plus a service charge are due and payable on the (date) - or will be taken from the security deposit.
2. Have the tenants prepaid utilities as part of the deposit process. So, first and last month's rent plus prepayment of utilities of $300 (or some figure) that is non-refundable. (At least you'll have that expense accounted for upfront).
3. How about doing it the "dorm" way...have an option where they pre-pay rent and utilities upfront when they move in - and if utilities exceed the pre-payment, the excess will be deducted from their deposit when they leave.
Hope this helps...and again, I'm impressed that you're addressing this issue beforehand.
In a normal 12 month student rentals I include as few utilities as possible but in cases of shared heating or something similar I cover that portion of the utility bills. I currently have one unit which is a corporate / visiting scholar rental and for that unit I do the opposite and cover everything. I even have a nice flat screen, Hulu and fast Wifi. In this case the setup is much closer to an Airbnb/vacation rental than a normal rental unit. It works well for renters who are only staying with us fo 2-6 months.
Great advice from @Scott Dixon & @Patricia Steiner. I do everything possible to limit any tenant's utilities that I pay for. There's no skin in the game without a cap so I would highly recommend that. We re-bill for water on every one of my units.