College Students vs. Families: Which is better to rent to?
New to Real Estate · Cleveland, OH · Member since 2017 · 47 posts · 15 votes
College Students vs. Families: Which is better to rent to?
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Investor · Atlanta, GA · Member since 2016 · 31 posts · 28 votes
9yHi, I currently have student rental homes and single family homes. I would say that another pro to student rentals is higher cash flow. You can treat every bedroom as a separate unit. For instance, on a 3bd/2ba home you could potentially charge $550 per bedroom ($1650 total) versus a single family occupancy total rent rate of $1200. It is true that you will potentially have a higher turnover rate than single-family occupants; also there is a higher probability of wear and tear with students versus single-family occupants, but none of this is guaranteed. If the school district for elementary and middle schools is not a top school district where your home is located, you're probably going to experience a single-family occupancy turnover every two to three years or so. That's about the average for student rentals. The way to combat your wear and tear is, one, to properly screen your applicants, the other is to charge a premium price. However, in order to charge a premium price your home has to be of premium quality, so I would recommend modernizing the home with decent flooring, appliances, fresh paint, laminate and tile flooring (no carpet), etc. By doing so, you attract 4 year juniors, 5th year seniors and graduate students, kids who are typically more responsible and not only want a nicer place to live, but also will take more interest in maintaining the quality of home.
I say no carpet because even the best students will spill and stain carpets and it lowers the quality of the home when showing new potential residents stained carpet. Carpet cleaning fees can escalate very fast year after year, I say spend the money up front and put in laminate flooring, doesn't have to be expensive, but it looks much better, more durable and last longer than carpet. Also tile in the bathrooms, much better than linoleum, same benefits of laminate over carpet. You basically need to "student proof" the home, any little thing you could potentially see causing a problem or being broken by negligence, try to take preventative measures to replace beforehand. Little things such as assuring that if the water line for the refrigerator sits on the floor behind the refrigerator that a student can't accidentally push the refrigerator against the wall (while horse-playing) and break the water line. I would not recommend any hanging light fixtures, replace all with ceiling mounted light fixtures...the only exceptions are ceiling fans. A good idea is to have ceiling fans in each bedroom also, it cuts down on hvac expenses, and even if you're not paying utilities it helps to retain students when they have low utility expenses in your home. Make sure you have durable bath and kitchen faucets...Ive found 3-hole faucets to be more durable than single-hole faucets. The more you "student-proof" the home, the less wear and tear and maintenance calls you get, and the more "passive" this rental becomes.
I would also add that if the appliances need to be replaced (only if necessary) to replace with stainless steel appliances, trust me, you can find stainless steel appliances from a scratch and dent place for barely $100 more than a white or black appliance and the stainless steel will add much more appeal to your home. If you present a quality product, you will get quality students, and the rent roll will certainly be higher than SFR with potentially the same turnover rate. If you're still in college, I would certainly recommend you house-hack and have your roommates paying down your mortgage for you. That gives your a free place to live, your gaining in appreciation, possibly getting cash flow, getting tax savings, and getting loan pay down...its a great win. Anyway, I hope this helps. Good luck.
19 Replies
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes9y
Well, since you can't legally discriminate against a family, you might not have a choice. Given the two, however, I prefer upper-year college students (junior and above, graduate students). I have found there's really no rhyme or reason why people stay or go, so I wouldn't count on the longevity factor with a family, and any house with kids is going to need more maintenance. I've had houses that college students lived in that appeared when they left that no one ever lived in the house, i.e. some cabinets were never even opened. The college students we have had rent our homes have been good tenants, but we screen heavily.
Skyline Properties - Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes9yGarrett F Anderson Some of this (my opinion) has to do with the type of property. If college students are going to cram 5 full-sized adults in a 3 bedroom/2 bathroom home you'll get a lot of wear and tear, parking is a pain, noise complaints in a family neighborhood, the occasional kegger, etc. Contrast that with a 2 bedroom/1 bathroom apartment/duplex/triplex/quad/etc. There you don't have enough room for the kegger, grad students might find it more appealing for privacy. Less concern around parking, etc. I'm being overly general but as someone who does rent to students the size/kind of units does play into it.
I'd say something that would make it more attractive to a family would be school districts, these would drive up costs, but might not translate to much higher rent.
On the flip side, a college student would care less about schools, so in theory the housing stock should be "less" and you'd probably get more rent per dollar spent.- New to Real Estate · Cleveland, OH · Member since 2017 · 47 posts · 15 votes9y
@JD Martin Thank you for the reply! I will gladly accept any qualified applicant but like you said, if given the choice, I was leaning towards college kids as well. Thank you for our input I will definitely keep your thoughts in mind!
@Andrew Johnson You're absolutely correct. I would prefer to buy a duplex right after college and house hack it. Then, rent it out so that goes along the lines of what you said.
@Matt K. That's true, I never thought about it like that. So it would in turn be more profitable to buy a house where school districts aren't as big of a factor but where college kids will be able to rent, correct?
I would look at it like this:
What makes your rental attractive to a family? It'd be a strong school district and that will most likely drive up the sale price of the homes. However, that doesn't mean that it creates a strong rental market and that can cause rents to be lower. You're also likely going to need a bigger place, not many families are going to want to move into a 2/1 if they were they could easily just get an apartment.
What makes your rental strong to college kids? It's going to be how close it is to campus/ nightlife/work. Like mentioned I'd go for graduate student. This student would likely be more adjusted to living on their own, maybe have a career or at least more likely to have a steady job. Plus many things (think location to school/work/nightlife) would also help you rent to non students. It'd also be more likely that the rental market would be "stronger" because most grad students or young professionals either don't have the funds saved up to buy a house or are only in the area for limited ammount of time.
But if you going profit only ( I wouldn't) and you know the area you are investing in AND are capable of being hands on you could always go the section 8 route. That'd be cheap houses, you'd know the min rent prices... but what looks good on paper doesn't translate to good in real life. I'd highly suggest not doing this to start out...- New to Real Estate · Cleveland, OH · Member since 2017 · 47 posts · 15 votes9y
@Matt K. That makes a lot of sense. Thank you for spelling that out for me. It would be very difficult to buy a larger house in a school district being a college kid myself with barely any savings/ credit so I will stay away from those areas. I've found a few houses close to the campus or next to downtown and that coincides with what you said as well! I will spend more time looking for more of those deals. Thanks again!
- Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes9y
I've had really good luck with families. Show me a young couple with a child going into the first grade moving into a property in a good school district and I will show you a reliable tenant that is not moving for the next 6 years. I have nothing against student rentals either, I just think they are likely more work for more money, so may well be worth the trade off to you.
- Stockbridge, GA · Member since 2015 · 42 posts · 12 votes9yI am a newbie but I have a college student and was just discussing student apartment rentals today. My daughter is a junior and will be remtimg 1/2 of a 2/2 this year. Her rent will be $480 per month which includes an small allowance for water and electric and all other utilities are included. They must pay the difference if water or electric goes over the allowance. Furthermore, the second tenant has the same deal meaning tje landlord
- Stockbridge, GA · Member since 2015 · 42 posts · 12 votes9y...is collecting $960 monthly. The leases are separate so the student's financials are not co-dependent which is comforting for parents. Great for the owner too as these apartments would rent for about $700 to a family.
- Investor · Atlanta, GA · Member since 2016 · 31 posts · 28 votes9y
Hi, I currently have student rental homes and single family homes. I would say that another pro to student rentals is higher cash flow. You can treat every bedroom as a separate unit. For instance, on a 3bd/2ba home you could potentially charge $550 per bedroom ($1650 total) versus a single family occupancy total rent rate of $1200. It is true that you will potentially have a higher turnover rate than single-family occupants; also there is a higher probability of wear and tear with students versus single-family occupants, but none of this is guaranteed. If the school district for elementary and middle schools is not a top school district where your home is located, you're probably going to experience a single-family occupancy turnover every two to three years or so. That's about the average for student rentals. The way to combat your wear and tear is, one, to properly screen your applicants, the other is to charge a premium price. However, in order to charge a premium price your home has to be of premium quality, so I would recommend modernizing the home with decent flooring, appliances, fresh paint, laminate and tile flooring (no carpet), etc. By doing so, you attract 4 year juniors, 5th year seniors and graduate students, kids who are typically more responsible and not only want a nicer place to live, but also will take more interest in maintaining the quality of home.
I say no carpet because even the best students will spill and stain carpets and it lowers the quality of the home when showing new potential residents stained carpet. Carpet cleaning fees can escalate very fast year after year, I say spend the money up front and put in laminate flooring, doesn't have to be expensive, but it looks much better, more durable and last longer than carpet. Also tile in the bathrooms, much better than linoleum, same benefits of laminate over carpet. You basically need to "student proof" the home, any little thing you could potentially see causing a problem or being broken by negligence, try to take preventative measures to replace beforehand. Little things such as assuring that if the water line for the refrigerator sits on the floor behind the refrigerator that a student can't accidentally push the refrigerator against the wall (while horse-playing) and break the water line. I would not recommend any hanging light fixtures, replace all with ceiling mounted light fixtures...the only exceptions are ceiling fans. A good idea is to have ceiling fans in each bedroom also, it cuts down on hvac expenses, and even if you're not paying utilities it helps to retain students when they have low utility expenses in your home. Make sure you have durable bath and kitchen faucets...Ive found 3-hole faucets to be more durable than single-hole faucets. The more you "student-proof" the home, the less wear and tear and maintenance calls you get, and the more "passive" this rental becomes.
I would also add that if the appliances need to be replaced (only if necessary) to replace with stainless steel appliances, trust me, you can find stainless steel appliances from a scratch and dent place for barely $100 more than a white or black appliance and the stainless steel will add much more appeal to your home. If you present a quality product, you will get quality students, and the rent roll will certainly be higher than SFR with potentially the same turnover rate. If you're still in college, I would certainly recommend you house-hack and have your roommates paying down your mortgage for you. That gives your a free place to live, your gaining in appreciation, possibly getting cash flow, getting tax savings, and getting loan pay down...its a great win. Anyway, I hope this helps. Good luck.
- San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes9y
My favorite tenants were law students. But, it doesn't look like that's a tenant pool for you in your town, unfortunately.
Another thought is that if I was to buy a rental property now, knowing what I do, I'd buy one with tiny studio apartments - whether your tenants are students or not.
The building I managed in Silicon Valley, CA, was next to a private university that also had a law school. But, all of our tenants were not students.
Most of the 26 units in that building, were tiny studios. The beauty of having tiny studios for your units, is that you won't ever have to discriminate against families. They will mostly filter themselves out. I did have couples with one child, but they didn't last long. We didn't have an elevator or any type of grass or yard. So, anyone with a kid, or a couple who became pregnant, opted to move somewhere more conducive to life with a kid.
If you decide to house hack while you're a student, I suggest renting out room separately. The main hassle with leases with multiple students is that someone will inevitably want to break the lease, then you have to deal with security deposit hassles, dealing with yes or no to subletting, etc. PITA.
I'd also have a weekly housekeeper to clean that's included in the rent, so you don't have to deal with arguments about who is cleaning or not, etc. And put a lock on the thermostat for heat/cooling, because that will be another problem area.
And you might want to consider putting small fridges in the rooms, to avoid fights over people stealing food and allow locks on their doors.
Just anything you can think of that's a pain for roommate life, try to avoid.
And I suggest only advertising to groups you'd want to rent to - such as the engineering department bulletin board. I ended up only advertising through the law school on campus next door. I also gave my current tenants a $100 rent credit if I rented to anyone they referred to me. I ended up with a wait list of law students, who are really quiet, no trouble, and usually stayed 3+ years if I got them their first year.
I also let them sublet over the summer. And by the way, summers can be lucrative, if the local college has summer internships. It's really hard for those students to find housing that's affordable for just the summer. You can charge a premium to students who just want to rent for the summer internships.
Good luck to you.
- Investor · Herriman, UT · Member since 2017 · 79 posts · 60 votes9y
I just posted this question about a month ago. My 1st property, in a college town, do I rent to students or families? The students found me. 4 college kids wanted the upstairs unit of my duplex so bad that they offered me $200 more in rent. (they pay $1400, my mortgage is $1600). The downstairs unit is a single male going to school as well. He pays $900. He has 2 1/2 years left so I will do all that I can to retain him for another year! I was targeting families at first, and young married couples, but this 4-some really wanted in. They agreed to a larger deposit and will sign a 1 year lease. One of the 4 will have a co-signer. Each will be paying $350 + approx $37 for utilities. That's a great deal in this town.
- Real Estate Agent · San Antonio, TX · Member since 2017 · 814 posts · 466 votes9y
I love college student communities. Most people are afraid due to fraternities or sororities, etc. I have found very good students on my rentals, most of them postgraduates.
But the way you put it, I guess Family Rentals is a win win.
You talked about about College rental turnover.. to me that is Vacancy. No longevity on Student Rentals.
Constant business for College students? What about families? They do also need homes as well. It all depends on what city you are located. I guess point for collage student community.
Have you know the laws in your state? Some state laws allowed such many people unrelated under one roof... You may want to know the state laws before getting into a College rental deal for students.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes9y
@Garrett F Anderson the advantage of student rentals is the higher rent and the advantage of family is longevity.
You cannot discriminate, but where you buy your property will mostly determine your tenant type. If you buy across the street from an elementary school, you will probably get a family. If you buy across the street from a college, you will probably get students.
My tenants are all families due to my property location and type of home. I chose that because I don't want to deal with turn over, college parties, roommate disputes and angry neighbors. More importantly my city has a maximum occupancy of 3 people for un-related adults in a property. The college rentals in my city put 5-6 people in a house and violate the ordinance. I am just not comfortable with the liability risk. If I rented to only 3 people, then I would lose the higher rents and at that point a family property is a better option.
College rentals is a great way to make money, but you need a good system and time to manage.
- 9yJimmy MoncriefPro MemberChattanooga, TN · Member since 2010 · 319 posts · 100 votes
I have done a 180 on this issue.
I used to love multifamily and the cash-flow with college kids (ALWAYS GET THE PARENTS TO GUARANTY THE LEASE).
However, I really like having families in my property and them treating it like their own. The less maintenance costs the better.
Here is an infographic on single family vs multifamily: http://realestatefinancehq.com/single-family-versus-multifamily-real-estate-investing-infographic/
- New to Real Estate · Cleveland, OH · Member since 2017 · 47 posts · 15 votes9y
Thank you to everyone who added feedback! I really appreciate all the advice and look forward to putting it to good use! From everyone's comments, it sounds like a good idea to target college students because I don't mind the extra work (because I have time) and I need a higher cash flow in order to invest in future properties. I will use all the tips and small tricks you guys mentioned! Thanks again!
- Residential Real Estate Agent · Grand Rapids, MI · Member since 2013 · 803 posts · 689 votes9y
I have a 50/50 mixture on this with my properties. I don't discriminate against any applicants but when I buy a property in a certain neighborhood its almost a guarantee that college kids will rent it versus families. The thing I like about families is they take care of the exterior appearance more than college kids. They lay mulch, plant plants, and take pride in the home. College kids come and go and could care less about anything to do with the property. They do jump around from property to property more often to take vacancy into account but they are willing to pay a premium for certain areas versus families. I would suggest a mixture of both as you don't mind the extra work today but in two years you might get sick of the constant turnover.
- New to Real Estate · Cleveland, OH · Member since 2017 · 47 posts · 15 votes9y
Originally posted by @Jake Thomas:
I have a 50/50 mixture on this with my properties. I don't discriminate against any applicants but when I buy a property in a certain neighborhood its almost a guarantee that college kids will rent it versus families. The thing I like about families is they take care of the exterior appearance more than college kids. They lay mulch, plant plants, and take pride in the home. College kids come and go and could care less about anything to do with the property. They do jump around from property to property more often to take vacancy into account but they are willing to pay a premium for certain areas versus families. I would suggest a mixture of both as you don't mind the extra work today but in two years you might get sick of the constant turnover.
That's very true. I know if I buy a property right next to the school that students will want it just because of the proximity to the university. Many college houses I see now they don't care to maintain the outside. I think diversifying my portfolio is always a good idea! Hopefully I have the ability to do so down the road. Thank you for the input!
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