College Towns: Are we approaching a buying opportunity

Buying & Selling Real Estate
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College Towns: Are we approaching a buying opportunity

Gregory SchwartzBusiness Member
Rental Property Investor · College Station, TX · Member since 2016 · 1k+ posts · 1k+ votes

For those of you that buy and hold in college towns do you see this fall as...

A. The same old housing market, all the students will be back. Sunshine and rainbows for everyone

B. Buying opportunity. This is the Thursday before Black Friday. Everything is about to be on sale!!

C. College's are never going to bounce back, online education is the way of the future. Sell now and run!

This applies to towns like; College Station, Clemson, Boulder, Anne Arbor, Madison, Chapel Hill, State College, Gainesville, Blacksburg, Charlottesville, Tallahasse, Morgantown, Athens, Tuscaloosa, and the many other towns dominated by student population. 

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Cole Oraham
Real Estate Agent · Clemson, SC · Member since 2015 · 56 posts · 35 votes
6y

I'm in the Clemson market. It was rough trying to get leases from March-Mid May. A lot of large communities were in panic mode and offering huge concessions because leasing came to a screeching stop. Students were hesitant to sign leases due to the uncertainty of on campus classes in the fall. Activity has picked back up, and most places are nearing their normal pre-leased occupancy levels. Depending on the type of property, I think that demand is still present. I know Clemson has notified faculty that they need to be prepared to pivot to online/hybrid classes at any point during the semester. I think if that happens then we might see an uptick in delinquency and THAT could be the thing that tips the scale in favor of buyers. 

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  • Tom Wagner
    Real Estate Agent · Minneapolis · Member since 2019 · 338 posts · 219 votes
    6y

    I vote for A. Linking an interesting article to support my vote below. The Top ~200 universities in the USA will continue to be safe investment locations, both this year, next year and for the next 20+ years.

    https://www.marketwatch.com/story/more-than-3-in-4-college-students-plan-to-return-to-campus-this-fall-but-they-promise-not-to-party-2020-07-15

    3Reply
  • Kyle DwyerPro Member
    Rental Property Investor · Seguin, TX · Member since 2017 · 45 posts · 21 votes
    6y

    @Gregory Schwartz

    I vote D.

    The market isn't the same, and will not be what it was. But that isn't necessarily a bad thing. The market changing due to world events doesn't mean it is getting worse!! It means you have to change with it.

    If you can do that, then success will be there for you. Its time for the world to pivot. Lets pivot with it.

    1Reply
  • Cole Oraham
    Real Estate Agent · Clemson, SC · Member since 2015 · 56 posts · 35 votes
    6y

    I'm in the Clemson market. It was rough trying to get leases from March-Mid May. A lot of large communities were in panic mode and offering huge concessions because leasing came to a screeching stop. Students were hesitant to sign leases due to the uncertainty of on campus classes in the fall. Activity has picked back up, and most places are nearing their normal pre-leased occupancy levels. Depending on the type of property, I think that demand is still present. I know Clemson has notified faculty that they need to be prepared to pivot to online/hybrid classes at any point during the semester. I think if that happens then we might see an uptick in delinquency and THAT could be the thing that tips the scale in favor of buyers. 

    8Reply
  • Gregory SchwartzBusiness Member
    OP
    Rental Property Investor · College Station, TX · Member since 2016 · 1k+ posts · 1k+ votes
    6y

    @Tom Wagner thanks for the link. I find it interesting that they polled students. I wonder how parents would answer those same questions.

    @Kyle Dwyer ahh yes the ever-present option D. I do agree that there will be some major changes and we will all have to adapt. 

    @Cole Oraham TAMU has announced a hybrid model but I worry about all the international students that will have travel restrictions, or parents that won't allow students to return, or even worse sick professors (generally older and at much higher risk). No matter how this fall pans out I feel that the big-name schools will bound back to full enrollment in 2021. 

    [email protected]443-812-0357
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  • Mark H. Porter
    Investor · SC NC, VA · Member since 2020 · 1k+ posts · 756 votes
    6y

    I live in a college town and we have 10 groups waiting for a 3br as the college spread out the on-campus housing so it doesn’t hold as much.  We’re also seeing that even though some students may choose online classes they still want to live here for the college social experience.

    Same in Columbia, SC and Amherst, students are now funding it hard to get housing as they hesitated in April.

    2Reply
  • Mark H. Porter
    Investor · SC NC, VA · Member since 2020 · 1k+ posts · 756 votes
    6y

    Sorry, forgot to vote.  Since D is already taken I go with E - on-campus housing will be reduced as students demand more physical space to be able to distance themselves.  Off-campus housing will have greater demand.

    8Reply
  • Carl C.
    Investor · New York City, NY · Member since 2014 · 289 posts · 374 votes
    6y

    Things are totally different for us. We expected demand to crater. We have lost tenants over the last few years to a large student development nearby and have been planning to sell our student rentals. Instead, we have had exponentially higher demand as the school is planning to have a limited opening and no one wants to live in dorms or apartment buildings right now. 

    4Reply
  • Jeremy HartPro Member
    Residential Real Estate Broker · Blacksburg, VA · Member since 2016 · 155 posts · 67 votes
    6y

    Blacksburg checking in.

    I'm not sure any of those apply. It's definitely not business as usual, so A is out. I don't expect that the sky is falling, so B is out. And housing is still going to be a basic need, so C is out. 

    Q1 and Q2 in our market have been like most other primarily-university towns across the country, with inventory levels down 20-25%, and buyer demand surging. I do think that's going to ease a bit in Q3 and Q4 here, simply because our trends (+/-) seem to be 6-12 months behind national trends.

    I don't have an answer, necessarily, but what we're advising our agents and our clients is to continue to move forward with cautious optimism. We have not seen a flood of inventory from skittish investment owners - seems everyone is taking the "wait and see" approach.

    1Reply
  • CJ Chaney
    Member since 2020 · 8 posts · 8 votes
    6y

    I Just recently graduated from UCF right before all of this happened so I do still know a lot of students still in college. A lot of them say they're not going back to living around campus or even continuing college at all. The high rental rates of the student living are what is eats up most of their loans. I believe Universities and student living is going on a huge decline. 

    Which is not bad, people are starting to see the biggest scam of our lifetime

    3Reply
  • Jeremy HartPro Member
    Residential Real Estate Broker · Blacksburg, VA · Member since 2016 · 155 posts · 67 votes
    6y

    @CJ Chaney thanks for this - can you clarify what is viewed as the scam? I've not heard that description before, so I'm wondering is it in the high rates, in college in general ...?  Can you clarify?

    0Reply
  • Nientzu Patterson
    Real Estate Agent · Gainesville, FL · Member since 2020 · 5 posts · 4 votes
    6y

    I said "A".

    Well, Gainesville housing market is quite hot actually and has been going on like this for last 3 years. It is seller's market for medium price homes which is in short inventory. Univ of Florida is ranked #7 as top public university with top sports teams and the cost of attendance at the bottom low. So the talents will keep coming forever.  Being in this city of decades....it's a blooming city for sure.

    0Reply
  • Will GastonPro Member
    Rental Property Investor · Columbia, SC · Member since 2010 · 1k+ posts · 2k+ votes
    6y

    @Gregory Schwartz

    I think demand will be fine. It's oversupply that I'm worried about in my market (Columbia, South Carolina.)

    It feels like there is 10x more competition now than just 5 years ago. We have a lot of national/regional developers building and buying up units. I would heavily advise against buying anything other than A+ location properties (i.e. right beside bars or football stadium). 

    FWIW I'm 99% leased for the fall and have had 100% rent payments for all of my 150+ students in April, May, June, & July. Hopeful that this is the same for next year too.

    7Reply
  • Ujwal Velagapudi
    Investor/Agent/Entrepreneur · Dallas, TX · Member since 2016 · 464 posts · 564 votes
    6y

    I see it more like option C (maybe not quite as drastic though), something that was slowly starting to go towards online education but was amplified by the current times. The local college market as a whole makes most of their revenue in the 8 months of school, and is swatting away flies in the summer for the most part. It doesn't need to be a full transition to online, all it takes is a small percentage of folks who are either mandated to virtual learning or choose to that will close businesses in college towns. Out of the kids who decide to stay at home, I don't see how kids/their parents can afford to pay extremely high rent when they are not physically at school and just taking online classes for 2020-2021 school year leases already signed pre-covid. I think in the short term we'll see more defaults and people backing out of their binding/personally guaranteed leases which just puts landlords in a tough position. 

    In the long term I do think more kids & families will choose the route of staying at home (or other cheaper, non-college towns) & opting for an online/hybrid degree. As more online options will inevitably form during this time, at lower & subsidized tuition, students will have additional options which could consist of learning remotely at a lower cost and not having to pay higher rents or cost of living in college towns. On top of that, I feel like the college degree is being slowly becoming less and less valuable as it was decades ago. Many here on BP that are proof you can still be very successful without a college degree at all or at least not a very high end university degree. 

    1Reply
  • Donnie Grill
    Rental Property Investor · Tuscaloosa, AL · Member since 2020 · 2 posts · 1 vote
    6y

    Tuscaloosa is seeing an uptick in students wanting to live on campus. Rentals - probably a few more available than normal and more subleases on rooms.

    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    6y

    Harvard is requiring some students to live in the dorms and yet they only offer classes online for the next school year. Total revenue grab to keep their dorms filled. People are sick of the increasing cost of college and the associated debt. A good chunk of that is student housing and cost to maintain classroom buildings, so remote learning is a huge opportunity to reduce that expense. Of course many people will always want the traditional on campus experience. I think houses and small multi close to campus will stay in decent demand. It could slow up the construction of new apartment buildings or dorms.

    0Reply
  • Mark H. Porter
    Investor · SC NC, VA · Member since 2020 · 1k+ posts · 756 votes
    6y

    It takes years for a bricks and mortar college to establish an online presence that is less expensive.  Existing colleges have the infrastructure built to support X number of students.  That infrastructure doesn't go away, that's why online classes are just as expensive.  Also, I taught an online graduate class for 8 years and the classes are much smaller so there are more teachers.  It's not a money saver until you hit economies of scale.

    0Reply
  • Gregory SchwartzBusiness Member
    OP
    Rental Property Investor · College Station, TX · Member since 2016 · 1k+ posts · 1k+ votes
    6y

    @Will Gaston we're seeing that here in College Station. In 2017 and 2018 the big apartments went gangbusters (3000+ units) driving rents down. I like your point about buying in strategic locations. Maybe COVID will scare off the money funding the giant apartment complexes. 

    @Ujwal Velagapudi I somewhat agree. In the long hall, I feel the smaller schools will suffer from online education. Schools with a history of tradition and a large athletic program will drawl those students that want the in-person education experience. 

    I just got off a zoom call and one of the members mentioned that his daughter (whos a college student) has already made the plan to move into an apartment if the school shuts down and goes 100% online. I wonder if that will be a trend. 

    [email protected]443-812-0357
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    1Reply
  • Daniel Vella
    Charleston, SC · Member since 2017 · 10 posts · 11 votes
    6y

    @Gregory Schwartz I’d like for it to be B. I e had my eye on some properties in Clemson for a while @Cole Oraham and is really like for it to be true. I haven’t noticed an uptick in the volume for sale in the community I’m watching, though. Maybe leases run out about now?

    My day job is in education, and I’ve observed that hybrid models and online learning are great for some, but the “college experience” that my little brother wanted is still a big piece of life in the college years, and online classes can be taken from a nice rental near campus.

    0Reply
  • Ujwal Velagapudi
    Investor/Agent/Entrepreneur · Dallas, TX · Member since 2016 · 464 posts · 564 votes
    6y

    @Gregory Schwartz Yeah, definitely think the larger programs can weather the storm, but overall I think even with a slight decrease it can be enough to make a difference for the local market, especially with all the new construction I've seen on campuses. 

    As an 18-22 year old, I 100% would've wanted to be at school even if classes went fully online. Very few things, if anything, can compare to the social experience at that age, and even more so at a larger institution. But I just think with the way the job market is (especially for hourly employees) it'll be very tough for kids to support themselves living on their own, and parental support has been hit too with so many job losses. Weighing out the cost/benefits of paying rent to study online from a college apartment vs. living at home rent free is something we've been analyzing for the college kids in our family/community this upcoming year. Unfortunately it'll be tough to get out of any lease at this point anyways. 

    2Reply
  • Danny Grey
    Investor · La Jolla, CA · Member since 2016 · 66 posts · 169 votes
    6y

    The best buying opportunity might not necessarily be college towns , but rather areas where you have student rentals that you could rent out to non-students if the college(s) imploded and student demand waned.

    Example: I know an investor who owns several apartment complexes in the El Cerrito area of San Diego, near San Diego State University. He rents to students, but if that market dried up for any reason, he's still within a few miles of downtown San Diego, near 2 major freeways, and is just a few miles from the coast, so his rentals would still be attractive to enough people to keep them rented.

    Just food for thought. The world is moving so fast that I think we all need to be ready to pivot strategies quickly if needed.

    3Reply
  • Nicholas U.Pro Member
    Member since 2020 · 65 posts · 44 votes
    6y

    I live in a college town and things aren't that simple.

    In my college town they are starting to build high rises and such so investing near campus is not wise in my opinion.  I do believe students will be back because there are major benefits to in class education, but buying around college campuses have their own risks.  

    I don't see massive selling in many areas regardless and you will still be paying a premium for paying close to campuses. 

    1Reply
  • Will GastonPro Member
    Rental Property Investor · Columbia, SC · Member since 2010 · 1k+ posts · 2k+ votes
    6y

    @Gregory Schwartz The biggest threat to success in student housing is vacancy IMO. I've had several properties go for a year without being leased.

    However, it's my experience that there is and always will be a demand for a premium product. I am now only buying in A+ locations and am doing tons of things to improve my properties to hedge against that possibility of the property going vacant. The numbers aren't as good as properties further away from campus but the vacancy risk is close to minimal. 

    2Reply
  • Account Closed
    Member since 2019 · 1k+ posts · 1k+ votes
    6y

    @Gregory Schwartz

    Not quite option C, but one step closer to people (employers and employees) accepting that the value of education is in outcomes, not accreditation. But then again we live in a society where the vast majority of wealthy folks hand $ to a NON-wealthy “advisor/er” to so called manage for them... so it may take a while. And while universities aren’t exactly the same as a 100 hour online course in how to commission other people’s success to create your own, they’re becoming closer every day. The pressure to publish, reliance on research grants to stay operational... let’s face it, they’re not necessarily focused on teaching much of anything. Almost every single engineering professor I had was there for one reason, research. Best memory of this I have is 1st year engineering physics, we’re smashing through dot product or some other introductory but often confusing concept. Girl in the very front row asks a question “can you go back through that last part I’m a little confused”... this is the keener type who literally is in the front row was the valedictorian student rep president probably homecoming queen and deputy mayor for her town. Prof looks at her for a solid 10 s pf silence... “there are 300 kids in this class, we don’t have time for questions”. End. Teaching is a necessary nuisance in a research based (funded) environment. The letters behind your name just mean you survived it, not that you learned anything.

    0Reply
  • Chevas E.
    New to Real Estate · Tuscaloosa, AL · Member since 2020 · 7 posts · 20 votes
    6y

    @Nicholas Urcuioli I’m curious what town you stay in. I see the same trend by U of A in Tucson

    0Reply
  • Nicholas U.Pro Member
    Member since 2020 · 65 posts · 44 votes
    6y

    @Chevas E. I live in Lafayette which is close to Purdue University.  I would expect to see more and more of this as time goes on.  

    1Reply
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