Nearing 1,000 College Student Tenants: Here's what I've Learned

[Will Gaston]

All:

I've recently spoken to a few REIA groups in my area about my business and I thought it would be a good idea to share this info in the forums.

I've been investing in college student rentals for 12 years and currently have ~50 units (SFHs and duplexes, mostly) within a 3-4 mile radius around the University of South Carolina in Columbia. I've rented to close to 1,000 students since I started at the age of 25 and wanted to offer some insight. It's my belief that because of the age, maturity level, number of decision makers (parents & their child) that it is one of the hardest niches in buy and hold investing. I have several landlord friends that have tried to rent to students and said "never again." But it can be done and done successfully

As I see it there are 4 major reasons why you'd want to rent to students:

1) CASH FLOW: 

They pay a whole lot more than non-students. In my estimation, somewhere between 20-100% more. I have a SFH home with a cost basis of 60k that rents for $1725, a 170k duplex that rents for $5,000, and a 90k that rents for $3,500. I pay no utilities and these are all one year leases.

2) THEIR CREDIT RATING

College students almost always pay their rent. At least the ones that I rent to. Out of all the students I've had, only had four (4) did not pay their lease in full since I started. Over 4 million dollars of leases and only ~$3500 was not paid. That's over 99.9%. And I do this without parental guarantors. 

3) ABILITY TO RAISE RENTS

Raising the rent $100/month on a family is a big deal. Raising it a $100/month on a duplex that 4 students are sharing is only $25/person. The fact that they split the rent up makes it much, much easier to raise rents on students versus non-students.

4) CONSISTENCY OF THE TENANT BASE

Barring a catastrophic occurrence, the University will be there for a long time. Every single year 5,000-6,000 new students will come in needing housing. I know when they need to move in and when they need to move out. Companies and even military bases can close down and move away, but this is highly unlikely with state University. 

There are roughly 8,754,999,549,142 reasons why you'd NOT want to rent to students but here are my top 4.

1) DEALING WITH PARENTS

This is usually surprising to a lot of other investors. My least favorite thing about the student rentals are not the students. It's their parents. They're usually well meaning, but when they get involved with the leasing process, a repair issue, a neighbor complaint, etc,  it always escalates the issue. And it's because they're only getting 20% of the story from their child.  Dealing with and communicating with 6 nineteen year old girls living in a property together is hard enough, I can't and won't deal with their 12 parents. 

2) DEALING WITH NEIGHBORS

Neighbors in my market don't like student rentals just as they don't everywhere else on planet earth. They usually have the expectation that students should be respectful, not park in the yard, have loud parties, etc. And they're right. That's what students should do. However, that is not realistic.  These same neighbors are living 3-4 blocks from 30,000 students and 25 bars. I've been able to curb a lot of this through large fines in my lease, but even having to pay $1,000 will not always dissuade my tenants from continuing that behavior. 

3) IRRESPONSIBILITY OF THE TENANT

If you're renting to students forget about ever getting them to admit to anything. They lie all of the time. "I don't know what happened" or "It was that way when I got home" are the constant excuses I hear regarding damages to the property. I've had over 100 broken windows in the last decade and only had 4 of those admit to breaking it on their own. Full disclosure I was the same way when I was in college. They're not bad kids, but they are kids. 

4) CONSTANT TURNOVER

80% of my properties turn over every single year. This makes the summer an incredibly busy time, especially with a lot of these turnovers happening within an 8-10 week span. We tried to expedite these turnovers by using the same wall paint, ceiling paint, trim paint for all of the properties. If you're looking for long term tenants, student rentals are not for you. I've only had one group stay for longer than 2 years and that was only for 3 years.

Hope this insight can help if you're thinking about renting to students. And if you do, Godspeed!

[Colleen F.]

@Will Gaston I have to say this is one of the best threads on student rentals and I always try to send people to it when they ask about this space.  

Curious does your town have unrelated persons ordinance and noise violation fines? We have a party ordinance by the town with stickers on the door after the first violation and escalating fines by the town in addition to anything I put in my lease. Just wonder if it is similar in other areas.

When we did student rentals in RI it was a 9 month lease (because of summer beach rentals), any other areas like that? 

[Will Gaston]

Yes @Colleen F. we do have unrelated ordinance in Columbia, South Carolina

It is 3 per unit in the City but you can have 6 in a duplex, 9 in a triplex, etc.

We also have a demerit system, but not a ton of issues if you're diligent with the City and tenants.

Re: 9 month lease: It is very difficult for tenants to find anything but a 12 month lease in our market. Would be impossible to make numbers work at 9 months with our (insane) property taxes.

[Josh Cissell]

Quote from @Kurinchi Sellamuthu:

Hi all, I'm getting serious about real estate investing and focusing on rentals for the immediate term. I'm curious about listings for student housing [I know zillow and other ad formats] but would like to know if there are websites I should know of to target student shoppers who are looking for housing. 

 We syndicate to about 50 different sites, but the majority of our leads come from Zillow and realtor.com.

[Alex Hunt]

@Will Gaston this is awesome! Love seeing experienced investors sharing their stories, and such detail. 
Would be happy to connect on any financing questions or future deals!

[Colleen F.]

@Will Gaston  What they try to get here is 3 per unit but there are a lot of 5 bedrooms so the ordinances have been taken to court several times.  Not sure how it stands now. 

That wasn't a specific question to you on 9 month rentals. You probably don't have the market for weekly summer rentals plus academic year rental for this to work. I just wondered if RI was only place that has this.  I was surprised not see to a similar setup in MA in areas close to the beach. 

[Christos Kappatos]

I just listed my property! (On Zillow) Have had a lot of interest (staying very competitive with the market rents) but sooo many people seem to never read the darn post! 
I have clearly mentioned a few times that all parties need to submit an application that must be approved before any showings can happen but people keep requesting showings 😐. Any tips to mitigate this for student rentals, or is it part of the game? 

[Dave Poeppelmeier]

Quote from @Christos Kappatos:

I just listed my property! (On Zillow) Have had a lot of interest (staying very competitive with the market rents) but sooo many people seem to never read the darn post! 
I have clearly mentioned a few times that all parties need to submit an application that must be approved before any showings can happen but people keep requesting showings 😐. Any tips to mitigate this for student rentals, or is it part of the game? 

LOLOLOLOLOL, welcome to Student Rentals my friend. No, Zillow is a crap show but a necessary evil. I literally do the same thing: I don't waste my time showing someone a house that they're not going to qualify for, if they even show up for the showing. People see a pretty house (or any house) and simply click the "Schedule a showing" or "Request an application" box. I even have "NOT AVAILABLE UNTIL AUGUST 1ST" as the first sentence in the description. Can people do an application online somewhere on your website or PM software? I also stopped taking Zillow applications. Just fill out your Saved Reply, send it to every person who inquires so you stay good with Fair Housing, and the ones that are truly interested (and have a prayer at qualifying) will fill out the application and pay the fee. Best of luck, and no you're not going crazy. 😉

[Christos Kappatos]

Quote from @Dave Poeppelmeier:

Quote from @Christos Kappatos:

I just listed my property! (On Zillow) Have had a lot of interest (staying very competitive with the market rents) but sooo many people seem to never read the darn post! 
I have clearly mentioned a few times that all parties need to submit an application that must be approved before any showings can happen but people keep requesting showings 😐. Any tips to mitigate this for student rentals, or is it part of the game? 

LOLOLOLOLOL, welcome to Student Rentals my friend. No, Zillow is a crap show but a necessary evil. I literally do the same thing: I don't waste my time showing someone a house that they're not going to qualify for, if they even show up for the showing. People see a pretty house (or any house) and simply click the "Schedule a showing" or "Request an application" box. I even have "NOT AVAILABLE UNTIL AUGUST 1ST" as the first sentence in the description. Can people do an application online somewhere on your website or PM software? I also stopped taking Zillow applications. Just fill out your Saved Reply, send it to every person who inquires so you stay good with Fair Housing, and the ones that are truly interested (and have a prayer at qualifying) will fill out the application and pay the fee. Best of luck, and no you're not going crazy. 😉

 haha, thanks Dave. It's crazy how many people just don't READ! Your saved reply, is it just a list of questions, or do you link them to a separate application process?

Also, I have a few applicants who live in student housing. I have never had to call student housing to verify their previous residence. Is that the same as calling any other apartment or landlord? 

[Dave Poeppelmeier]

Quote from @Christos Kappatos:

Quote from @Dave Poeppelmeier:

Quote from @Christos Kappatos:

I just listed my property! (On Zillow) Have had a lot of interest (staying very competitive with the market rents) but sooo many people seem to never read the darn post! 
I have clearly mentioned a few times that all parties need to submit an application that must be approved before any showings can happen but people keep requesting showings 😐. Any tips to mitigate this for student rentals, or is it part of the game? 

LOLOLOLOLOL, welcome to Student Rentals my friend. No, Zillow is a crap show but a necessary evil. I literally do the same thing: I don't waste my time showing someone a house that they're not going to qualify for, if they even show up for the showing. People see a pretty house (or any house) and simply click the "Schedule a showing" or "Request an application" box. I even have "NOT AVAILABLE UNTIL AUGUST 1ST" as the first sentence in the description. Can people do an application online somewhere on your website or PM software? I also stopped taking Zillow applications. Just fill out your Saved Reply, send it to every person who inquires so you stay good with Fair Housing, and the ones that are truly interested (and have a prayer at qualifying) will fill out the application and pay the fee. Best of luck, and no you're not going crazy. 😉

 haha, thanks Dave. It's crazy how many people just don't READ! Your saved reply, is it just a list of questions, or do you link them to a separate application process?

Also, I have a few applicants who live in student housing. I have never had to call student housing to verify their previous residence. Is that the same as calling any other apartment or landlord? 

I have a separate website that I send them to where I have all of the *same* info, pics, and a video walkthrough of the property. Zillow won't let you post any external links in the listing, but I send them a copy of the video in that message as well. Once people have to read the move in date, that eliminates 98% of people right there, and the others usually start to fill out the application on my website at that point. Regarding verifying living in the dorms, I've never done that, but I also have nicer houses that cost a smidge more and require cosigners, so that weeds out the party animals for the most part. 

[Will Gaston]

@Christos Kappatos 

I'm 100% serious:

Lowest expectations wins in college students.

Can't assume they'll read the lease, follow the lease, etc.

(Remember some of them had braces 2-3 years ago)

Their college housing is part of their learning experience. They need a wide berth.

[Andrew Syrios]

Good run down Will. Student rentals can be challenging but it's certainly a lucrative niche

[Christian Padilla]

Great post! The thought of buying near colleges has crossed my mind many times: an abundance of tenants & cash flow! It does have a few down sides but not enough to avoid doing it completely. Everything in real estate has pros and cons.

[Jake Andronico]

@Will Gaston

Love that this thread has come back up. Student rentals have changed my life. 

So many nuggets in here! Thank you. 

[Will Gaston]

@Jake Andronico I appreciate the kind words - thank you.

Where are your student rentals? What has your experience been like?

[Will Gaston]

Quote from @Christian Padilla:

Great post! The thought of buying near colleges has crossed my mind many times: an abundance of tenants & cash flow! It does have a few down sides but not enough to avoid doing it completely. Everything in real estate has pros and cons.

 Thank you Christian. 

I think of this niche as one with sharp edges. It's great once you know how to navigate the big stuff. Leasing within the school cycle, parents, and turnovers.

[Dave Poeppelmeier]

Quote from @Will Gaston:

@Christos Kappatos 

I'm 100% serious:

Lowest expectations wins in college students.

Can't assume they'll read the lease, follow the lease, etc.

(Remember some of them had braces 2-3 years ago)

Their college housing is part of their learning experience. They need a wide berth.

But, the good part is that we have a blank slate to work with. We can teach them how to live in a house the right way and help them with the bumpy road of turning into a functioning member of society. 😆

[Will Gaston]

Quote from @Dave Poeppelmeier:

Quote from @Will Gaston:

@Christos Kappatos 

I'm 100% serious:

Lowest expectations wins in college students.

Can't assume they'll read the lease, follow the lease, etc.

(Remember some of them had braces 2-3 years ago)

Their college housing is part of their learning experience. They need a wide berth.

But, the good part is that we have a blank slate to work with. We can teach them how to live in a house the right way and help them with the bumpy road of turning into a functioning member of society. 😆

 That's right Dave, lots of good life lessons for everybody!

[Jake Andronico]

Quote from @Will Gaston:

@Jake Andronico I appreciate the kind words - thank you.

Where are your student rentals? What has your experience been like?

About a 4-5 min drive to the University of Nevada, Reno and are 5 bedrooms each :)

[Gaetano Ciambriello]

Quote from @Christos Kappatos:

Quote from @Dave Poeppelmeier:

Quote from @Christos Kappatos:

I just listed my property! (On Zillow) Have had a lot of interest (staying very competitive with the market rents) but sooo many people seem to never read the darn post! 
I have clearly mentioned a few times that all parties need to submit an application that must be approved before any showings can happen but people keep requesting showings 😐. Any tips to mitigate this for student rentals, or is it part of the game? 

LOLOLOLOLOL, welcome to Student Rentals my friend. No, Zillow is a crap show but a necessary evil. I literally do the same thing: I don't waste my time showing someone a house that they're not going to qualify for, if they even show up for the showing. People see a pretty house (or any house) and simply click the "Schedule a showing" or "Request an application" box. I even have "NOT AVAILABLE UNTIL AUGUST 1ST" as the first sentence in the description. Can people do an application online somewhere on your website or PM software? I also stopped taking Zillow applications. Just fill out your Saved Reply, send it to every person who inquires so you stay good with Fair Housing, and the ones that are truly interested (and have a prayer at qualifying) will fill out the application and pay the fee. Best of luck, and no you're not going crazy. 😉

 haha, thanks Dave. It's crazy how many people just don't READ! Your saved reply, is it just a list of questions, or do you link them to a separate application process?

Also, I have a few applicants who live in student housing. I have never had to call student housing to verify their previous residence. Is that the same as calling any other apartment or landlord? 

The only people who read the lease are the crazy parents who redline items and send it back thinking we now want to rent to them after being such a PIA.