Investing in College Towns

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Investing in College Towns

Matthew Konkel
Real Estate Agent · Hayden Lake, ID · Member since 2020 · 7 posts · 8 votes

Hey everyone, 

I was looking into buying a duplex or single family home in a small college town of about 20,000 people and the school size is about 30,000. During the summer 90% of the university students leave, not sure if that means much if I advertise a 12 month lease. The town revolves about the University not to much here besides the University and a engineering facility. 

Just wondering everyones pros and cons of buying in a college town! 

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Nate Monson
Real Estate Agent · Albany, NY · Member since 2017 · 309 posts · 149 votes
6y

Hi @Dan Talmi I am an agent in Albany, NY. The student market is generally very lucrative here. SUNY Albany and St Rose create a very high level of demand for student rentals in the area. That being said I have been hearing that the schools might not bring everyone back to campus right away. So there could be some decreased demand. The numbers on a typical student rental look like this... Purchase price: 225k, Rents: $2800-$3000 monthly. Operating costs are usually generally hover around $1100-$1300 and your mortgage would account for another $800-$900. You can usually make most student rentals cash flow $1000 per month if you get it at the right price. Some challenges are finding a property manager if you need one. There are those who do it but aren't that good. And those who are good usually don't like to deal with students around here. I find managing it yourself to be the best way to go generally. Please feel free to reach out if you have anymore questions about Albany student rentals!

@Matthew Konkel in generally I think pros of student rentals are that you can get more rent than long term rentals in many markets and depending on the situation a lot of the times the rent is very secure. Whether it is parents or a student loan paying for the housing. Downfalls are that you generally have more work to do in terms of turnover and management. Other things to watch out for is making sure you have accurate rental rates. In my market the rent is paid monthly year round (even when the students aren't there). In other markets they may advertise it as "X monthly" but in reality they get semester payments and don't get paid for the summer and winter. Despite some negative I believe college rentals are a great investment avenue. Hope this helps!

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  • Brett G.
    CO · Member since 2018 · 69 posts · 52 votes
    6y

    @Matthew Konkel

    In the small Midwest college town where I am invested, it is typical to have a one year lease on student rentals.

    One of the biggest pros, at least for me, is student rentals can rent for much more. Also, we typically get the next lease done 3-4 months before the current lease is up, so we should roll right in to the next lease with no vacancy period.

    2Reply
  • Dan Talmi
    Member since 2020 · 10 posts · 0 votes
    6y

    I am also looking at a smallish to mid size market (Albany NY) which has a ton of colleges. I like the idea that there is a pipeline of new consumers coming in all the time. My feeling is that these folks often are subsidized by parents with money, potentially cushioning rental rates. 

    Any one got any experience with pros and cons of targeting this market?

    0Reply
  • Matthew Konkel
    OP
    Real Estate Agent · Hayden Lake, ID · Member since 2020 · 7 posts · 8 votes
    6y

    @Brett G.

    That’s a huge pro, I would love to cut down the vacancy period! It would also be nice to get a little more for rents. Thanks for the input, very helpful!  

    0Reply
  • Steve Potash
    Investor · Frostburg, MD · Member since 2015 · 46 posts · 26 votes
    6y

    It really depends on the university and town.  Some college towns are 12 month leases, others are 9 month leases.  If you're in a town, where all the off-campus housing only does 9 month leases, you're not going to get anyone to sign up for a 12 month lease, if all the students leave to go home for the summer.  So, it's best to figure out what the majority of off-campus housing rentals do, and plan on doing the same thing...and figure that in, when calculating your numbers.

    1Reply
  • Mark H. Porter
    Investor · SC NC, VA · Member since 2020 · 1k+ posts · 756 votes
    6y

    The students sign twelve month leases it order to guarantee a place to live.  Where I invest we have around 2% vacancy.  When the students moved at the end of Mayo would just rent it to someone else. 
    this also gives them a place to live for the summer As many stay to work.

    1Reply
  • Billy Smith
    Shawnee Mission, KS · Member since 2016 · 719 posts · 313 votes
    6y

    I looked into Lawrence Ks the money to play in that area is more then I am willing to pay .

    Yea seems 12 month lease are the norm ,they will rent beat up places if the location is close to campus you can get a top dollar .

    1Reply
  • Ryan MahoneyPro Member
    Rental Property Investor · Hastings, NE · Member since 2018 · 57 posts · 53 votes
    6y

    @Matthew Konkel - I invest in a small college town of about 25,000. I rent by the room and do give 9 month leases. Honestly it gives me an advantage over others in town in typically require 12 month leases. I can charge more per month and it works out in the end. This allows me to a couple options over the summer.

    If vacant I can make small repairs and updates.

    I often get students who are looking for summer housing if they have a job or something else which requires them to stay in town (especially those who live in college housing and are forced out in the summer)

    I will sometimes get students who decide they don’t want to take the time to move their stuff out so they will just pay rent over the summer and not even use the property just so they can keep their stuff in their room.

    It provides me the opportunity to suggest a 2 year lease with the option to move out and not pay rent for the summer months. I have got several students who view this as a good deal.

    In the end it is a little more work but it does get me in my properties more often to maintain them and allows me more options to increase my rental income over what would be the norm for my area.

    Good luck to you!

    2Reply
  • Hai Loc
    Specialist · Toronto, Ontario · Member since 2012 · 2k+ posts · 891 votes
    6y

    @Matthew Konkel

    A good place is around The Ohio State U..

    2Reply
  • Nate Monson
    Real Estate Agent · Albany, NY · Member since 2017 · 309 posts · 149 votes
    6y

    Hi @Dan Talmi I am an agent in Albany, NY. The student market is generally very lucrative here. SUNY Albany and St Rose create a very high level of demand for student rentals in the area. That being said I have been hearing that the schools might not bring everyone back to campus right away. So there could be some decreased demand. The numbers on a typical student rental look like this... Purchase price: 225k, Rents: $2800-$3000 monthly. Operating costs are usually generally hover around $1100-$1300 and your mortgage would account for another $800-$900. You can usually make most student rentals cash flow $1000 per month if you get it at the right price. Some challenges are finding a property manager if you need one. There are those who do it but aren't that good. And those who are good usually don't like to deal with students around here. I find managing it yourself to be the best way to go generally. Please feel free to reach out if you have anymore questions about Albany student rentals!

    @Matthew Konkel in generally I think pros of student rentals are that you can get more rent than long term rentals in many markets and depending on the situation a lot of the times the rent is very secure. Whether it is parents or a student loan paying for the housing. Downfalls are that you generally have more work to do in terms of turnover and management. Other things to watch out for is making sure you have accurate rental rates. In my market the rent is paid monthly year round (even when the students aren't there). In other markets they may advertise it as "X monthly" but in reality they get semester payments and don't get paid for the summer and winter. Despite some negative I believe college rentals are a great investment avenue. Hope this helps!

    5Reply
  • Paul DeSilvaPro Member
    Investor · New York, NY · Member since 2017 · 148 posts · 252 votes
    6y

    @Matthew Konkel I currently do not have any student rentals, my properties are just a little too far from the college but I do have a professor who is renting from me and he has already been told that he will not have any in person classes until FALL OF 2021! So please be cautious about student housing right now because we are hearing a lot about no fall classes in our area.

    1Reply
  • Zeke Liston
    Real Estate Agent · Columbus, OH · Member since 2018 · 1k+ posts · 1k+ votes
    6y

    I second @Hai Loc. OSU is one of the top growing universities, a great place to invest. 

    0Reply
  • Meghan Cheek
    Rental Property Investor · Member since 2018 · 42 posts · 20 votes
    6y

    @Matthew Konkel, Albany is a great rental market all around.  Depending on the neighborhood you get undergrads and grad students, as well as pharmacy, med students and medical residents as there are 2 major hospitals.  You also get plenty of young professionals, families, and state workers.  The student rental houses tend to be older (1920's era), and Albany is a pretty big party school so take that into account when it comes to repairs/maintenance/turnover etc...  Like @Nate Monson said, getting a good price is key.  I have heard it's hard to find good property managers so not sure how comfortable I would be doing long distance investing.  If you're looking to do long distance I would honestly skip over NY completely, the laws are heavily tenant friendly and taxes are high.  Good luck! 

    0Reply
  • Matthew Konkel
    OP
    Real Estate Agent · Hayden Lake, ID · Member since 2020 · 7 posts · 8 votes
    6y

    @Steve Potash I know apartments here do a 12 month lease, I could not find any that do a 9 month lease, which may be a good niche I could fill. I will have to do some research on multi family rentals.

    0Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    6y

    @Will Gaston can help you out here. I rent in a college town and most of the students stay on lease through the summer, as not only is it a major hassle moving all the furniture, it's a tall order finding another place as nice as ours for that price as we have a shortage of any housing here, much less student. 

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  • Account Closed
    Rental Property Investor · Albany, NY · Member since 2015 · 51 posts · 18 votes
    6y

    @Nate Monson I respectfully disagree with your cash flow analysis. Albany market is saturated with duplexes and multi family homes and I’m an agent here just like you and own investment properties of my own that I manage.

    Most of these homes are very old and sellers are trying to divest and get 225+ a two family. No home is going to cash flow $1000 / month at 225+ purchase price in Albany.

    The student rentals per bedroom range anywhere from 325/month -650/month.

    If you’re charging 650 a bedroom you better have the entire home updated from bathroom kitchen to windows and everything looking 21st century because most of these college students don’t want to settle nowadays ebcause it’s not like what it used to be.

    Like most rentals here your average rent per bedroom is around 450/ month. For these expect to have 5% monthly repair and maintenance budgeted , 5% for capex, utilities are generally on the tenant, trash and water is on owner. Trash is 90/unit / year. Water is an average of 400-800 yearly depending on usage and whether or not you provide washer and dryer.

    This above information is for whoever is looking for realistic numbers based on a investor who is getting his hands dirty and in the trenches with student rentals.

    Message me if you want more information.

    Also this does not account for any property management. There are tons of property management companies that focus on student rentals. Very easy to come by and expect to dish out a minimum of 8%.

    2Reply
  • Matthew Konkel
    OP
    Real Estate Agent · Hayden Lake, ID · Member since 2020 · 7 posts · 8 votes
    6y

    @Paul DeSilva-That’s Crazy! WSU announced a couple weeks ago that students are going to come back in for the Fall semester. With that being said we are averaging 3 new cases a day, so I would not be surprised if that changed. Definitely something to watch before I Buy!

    0Reply
  • Nate Monson
    Real Estate Agent · Albany, NY · Member since 2017 · 309 posts · 149 votes
    6y

    @Account Closed If you can find something wrong with my numbers please let me know. :) 

    0Reply
  • Randy Cooper
    Tracy, CA · Member since 2016 · 48 posts · 16 votes
    6y

    @Matthew Konkel

    I’m retiring. Selling the house. House hack with multi family. Short term rentals. Student housing is our choice of str also.

    Take care

    Randy

    0Reply
  • Will GastonPro Member
    Rental Property Investor · Columbia, SC · Member since 2010 · 1k+ posts · 2k+ votes
    6y
    Originally posted by @Matthew Konkel:

    Hey everyone, 

    I was looking into buying a duplex or single family home in a small college town of about 20,000 people and the school size is about 30,000. During the summer 90% of the university students leave, not sure if that means much if I advertise a 12 month lease. The town revolves about the University not to much here besides the University and a engineering facility. 

    Just wondering everyones pros and cons of buying in a college town! 

    This thread may be useful: Nearing 1,000 College Students: Here's What I've Learned

     Opinions and experiences vary in student rentals but, at scale, mine is this: College students are great for cash flow but the landlord will certainly earn it. 

    0Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    6y
    Originally posted by @Hai Loc:

    @Matthew Konkel

    A good place is around The Ohio State U..

     The best place is The Ohio State University

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  • Steve Potash
    Investor · Frostburg, MD · Member since 2015 · 46 posts · 26 votes
    6y
    Originally posted by @Nate Monson:

    @Account Closed If you can find something wrong with my numbers please let me know. :) 

    0Reply
  • Steve Potash
    Investor · Frostburg, MD · Member since 2015 · 46 posts · 26 votes
    6y
    Originally posted by @Nate Monson:

    @Account Closed If you can find something wrong with my numbers please let me know. :) 

    I can't really tell what you have in repairs, but you want to treat this like a business and capture all of your expenses. For example, are you putting this in an entity like an llc...most states have an annual fee. Also, you'll have a cost for a cpa to do your books. Cell phone expense, website, advertising, cutting the lawn, electric, snow removal (depending on where you are), pest control, lawn insect control, cleaning after students move out, any software costs for lead generation, tenants payments, online lease generation, etc.... plus how old is the property ($1,700 per yr is low if it's an older property). It's always better to overestimate and catch every expense, than underestimate and think your NOI is higher than it is, because then you'll overpay for the property. Also, some towns have annual rental property inspections, lead paint inspections, etc. When I first started out with student rentals, I probably missed alot of these, but I've now owned student rentals for 28 years, so I'm getting a bit better at estimating costs.

    2Reply
  • Alison Walden
    Member since 2019 · 23 posts · 13 votes
    6y

    @Nate Monson those numbers work assuming that person didn’t form an llc or you don’t have taxes included in your mortgage payments. At which point your expenses on just mortgage payments and taxes are closer to 24k not including any other expenses. I just Completed the brrrr process with similar numbers right outside of Albany.  

    0Reply
  • Account Closed
    Rental Property Investor · Albany, NY · Member since 2015 · 51 posts · 18 votes
    6y

    @Nate Monson as an investment property your down payment needs to be 25%. I’ve noticed closing cost to be around 6% if the purchase price. So your cash to close is a tad off. You’ll have lawn maintenance and snow maintenance as well. Lawn is around 30/month for 4 months, snow is per fall or per season and can be around 700/ season. If you have a multi unit legally tenants cannot be responsible for those things and landlord has to do the maintenance.

    That’ll bring you below 1k. Cash flow is cash coming into pocket post debt services. Cash on cash is the amount of cash required to close divided by annual cash flow.

    0Reply
  • Ian WalshBusiness Member
    Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    6y

    Covid taught us they are not immune to issues.

    0Reply
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