Students want a way out if classes go online due to Covid
Rental Property Investor · Queen, NYC · Member since 2018 · 63 posts · 22 votes
Just finished renovating a SFH intended to be used as student housing. Found a group of 5 students interested in signing a lease quite quickly. Some of the parents are asking if the students would be allowed to back out of the lease if their college decides that the fall semester will be held online.
Some background:
- As of Today, the college is scheduled to open in August and hold classes in person until Thanksgiving. This obviously might change if Pennsylvania get a spike in Covid cases and is ordered to stay home again.
- House is 5 min. walk to college and if rented to students bring almost twice as regular rentals.
- House is rented furnished and I am just about to order all the furniture...if rented to whoever unfurnished is preferred.
What would you do?
I'd tell them no or you could do a reduce rent for that time if the place is vacant. You are one month away from classes starting (is that right) and it looks like it will be in person. Even if things change part way through, they will need to stay there (last thing you want is a bunch of people travelling during a pandemic).
If it is rented furnished, then get the furniture now. Not sure if you are furnishing the bedrooms as well.
I'd tell them no or you could do a reduce rent for that time if the place is vacant. You are one month away from classes starting (is that right) and it looks like it will be in person. Even if things change part way through, they will need to stay there (last thing you want is a bunch of people travelling during a pandemic).
If it is rented furnished, then get the furniture now. Not sure if you are furnishing the bedrooms as well.
Tough call on that one.
Two of my nephews have opted to finish their degrees on-line (one is in Finance, 1 year left the other Eng. also 1 year left). Neither have any regrets. They have cancelled their off campus rentals & are glad to be free of the Covid-19 campus restrictions & added expense. The big advantage is that they can work in their fields while studying.
One is now an Eng. intern on a 8 yr job in NJ., free Hyatt Extended stay accommodation & stipends for living expenses. The other is in finance for a large company 'working from home'. In fact ALL my college graduated nephews, nieces, daughters are currently working from a 'home office' & some have been doing so for a couple of years. Surprisingly several of their respective parents, including my wife & I, have always worked from home offices over the last 25-30 years!!!
I have a feeling it could be a significant trend.
@Theresa Harris Yes, classes are scheduled to start in the last week of August, and as of today, all the colleges seem to be very confident about their reopening plans...The student housing scene here is very competitive and many of the houses get leases a year or two in advance...this makes it very tough to get into the market so I don't expect to find another group of students very easily...we were also delayed for months because no construction activity was allowed so the house became presentable only about 2 weeks ago...I might go for a reduction of rent or an agreed termination fee in case they have to vacate. Just wondering how other student housing landlords are coping with this.
I quite understand their concerns but have to balance them with having a house potentially sitting vacant for quite a while.
@Pat L. The future of higher education and office work is indeed fascinating...I started to work at home like everyone else in March and thinking about how to inform my boss that I have no plan to go back to the office even when this all mess is over...just with the money saved on the commute and eating out makes me feel I got a raise. My 2 cents is that over the next decade there is going to be a consolidation...the 1st tear universities will see increased demand and the small lesser schools will go under. Borders and Barnes and Nobles style. The larger schools can always increase international enrolment and (as one who came here as a student) there is still a lot of demand for American education from abroad.
Curious about your nephews. Did their landlords let them out of their leases early or did they had to pay some kind of early termination fee? Were they renting from small LL or bigger housing complexes?
@David London I only have one student rental and the current tenants renewed their lease, so I'm no help from that perspective. I know universities here in Canada have already announced what will be in person and what will be online. For most, there is the online option for the fall. If classes are still online in the spring, it is going to be horrible (speaking for myself as I have to teach and online is not easy; exams are a nightmare).
I would pass on them. There are plenty of students (like my two kids) who are going back to school regardless if classes are online or not. Find a group of students who are coming to town regardless and rent to them. There are also facebook groups for the University that you are focusing on where there are students asking about housing. Advertise in there and I am sure you will find renters. Good luck!
I had a similar situation recently, but it was for the tail end of the school year when the shut downs first started happening. It's a weird time, so I elected to work with the tenants to find a solution that worked for everyone. They were 75% of the way through their contract. My requirement was that as long as they found tenants that had approved applications and would sign a year long lease agreement, I would allow them out of their existing contract penalty free. This alleviated some of the burden of finding tenant replacements and also helped them out.
But to @Damaso Bautista's point, if it's a competitive student market, and there's already a concern before you sign an agreement with them, I'd seek other tenants so you don't have to worry about that situation arising. You should be able to find tenants if your unit is priced competitively, especially using the housing groups on Facebook - good luck!
While BP forums are ripe with discussions about the death of cities (mostly nyc and SF), I personally worry about the future of college towns and those with massive dependency on a single economy. If classes are going online, it’s a devastating blow for college towns across America. The Trump admin is making it worse by putting restrictions on foreign students.
It's a tough one, some of my student rentals have been filled with families. there are still students renting but it has slowed down, my properties are in central PA and I was also stopped on a renovation of a property that I had purchased a month before everything was shut down, now I am happy to say it is just about finished and fully rented, last tenants move in next month.
why not tell them that this is your rate, its a 12 month lease, either they take it or you will let the next applicant waiting have it. or if you are afraid you will not get it rented then do as mentioned and give them a lower rate but tell them its for the year, students are still looking, because no one knew what was going on with the colleges. we had a lease signed just this past Saturday for a student rental.
"...Curious about your nephews. Did their landlords let them out of their leases early or did they had to pay some kind of early termination fee? Were they renting from small LL or bigger housing complexes?..."
No idea on LL status but .. one left his possessions there until he could get back so I believe the rent was paid in full. The other left with everything immediately college closed, BUT a couple of out-of-state guys stayed on & absorbed the difference by taking in a couple more displaced fellow students.
@David London my niece rented an apartment from a university and they gave students credit back they moved out. She could have stayed, but chose to leave so she could save money. My guess is if you offer early termination, even if they could stay, they will leave to save money. This is a raw deal for landlords, but you may have to agree to it if you want to place tenants. Have a cancellation fee figured out when they sign the lease. I would do it in tiers, so if they leave within 3 months, they don't have to pay for 9 month, if they leave within 6 months, the other 6 moths are not billable. If they leave at the 7 month mark, they only get 3 months back, etc. Or do a flat buy out fee, like they have to pay 20% of all remaining lease months for cancellation. If you do it this way, it gives an option to get money back, but not 100%. That could be a nice compromise.
In our area we do student housing by the semester generally. Sounds like you guys are year long so that complicates things. I do worry about our college town a bit. Plenty of businesses thrive on the student population.
Just heard on the radio some/most of the colleges can longer jam all the kids into dorms so most of the kids will need to find off campus accommodations. Then based on the relative cost of student rentals they will then jam themselves into those properties.
An interesting turn of events !!!
@David London
I have a 2 college students, and borh rent rooms. If they do not go to campus, guess what, i am still responsible to pay. We scrambled to get a room for my daughter as the university would not guarantee housing (normalky they do). All her classes are online, but we still needed housing because even though fall semester is questionable, she was rightfully concerned about finding housing in the spring if they are required to be on campus. Ask your students what they will do in the spring if they are required to be on campus. My guess is they will need to secure housing now for the year.
Maybe ask about a month to minth lease?
@David London
I received that same question from a lot of my student tenants. I’ve basically told them the same thing I told them all last semester when school transitioned to online. The apartments are still there and available for them to live in whether or not school is being held on campus or online. WiFi is included along with the other utilities so they are welcome to live in the apartment and take their classes online from there. Nothing says they have to leave just because school is not on campus.
I’ve found that 99% of them understand and most of them prefer to stay as oppose to go home actually.
@David London
I believe we spoke once regarding a property in Bethlehem you had. I just read that East Stroudsburg University is going online, not far from Lehigh U. I would tread lightly at this point with student housing and maybe not furnish it as you may need to go regular tenant. My daughter will be starting at Kutztown U in August, but campus life/classes is all subject to change
@David London
My rentals are in Kutztown and several guys luckily are returning again this year. Last year when it hit some went home and some stayed. As time went on several of them started to return because they didn’t want to stay home. Plus some of the parents probably wanted them out of the house too. We are letting the guys out of their lease if classes do not start as in person but if classes do start and they move in then they have to pay or sublet their room. We did this to comfort the kids and parents. Most of my guys say they are staying either way. We do have one apartment still open and a few guys need a third person. I think most people are waiting to see what happens. Hopefully KU will stay the course and open.
@David London
From fox 56 52min ago
East Stroudsburg University has announced that their students will continue remote learning for the upcoming Fall semester.
"I must announce that East Stroudsburg University will be returning to remote learning for the majority of classes during the Fall 2020 semester," President Marcia Welsh said.
Had a really busy week preparing the house for the students but wanted to thank everyone for their advice...Many great points...In the end, following a better one bird in the hand approach, I agreed to a virus clause which will allow them in the event college go virtual again to either break the lease (losing only half month placement fee) or pay 50% of rent if they want to keep their place for the spring...then got a deluge of new applications (they were the only interested party for more then a month)...needless to say none of the other interested inquiries even brought the issue up...Saga is not over since even with this clause they drag their feet...gave them a deadline finish application by tomorrow and then moving on...
@Matt M. Yes I remember, I actually didn't have the chance yet to thank you for recommending Chris...or was actually waiting for him to finish the job but he is close enough and so far he was the most reliable GC I found in the area and great to work with...in the long run, IMO covid is just a hiccup (a long one) and student housing done right can bring nice returns...must say that doing it right is much harder than I expected so far...but I see the light at the end of the tunnel now.
@Pat L. It seems indeed this is the case and explains the deluge of inquiries I got this week. In a strange way, this created more demand.
@Damaso Bautista & @Danielle R. I was probably unclear when I said it is a competitive market...it is for the landlords and especially the newcomers...most students in the area sign with their off-campus housing about a year and sometimes even two in advance...this is something I couldn't even imagine and was totally unprepared for...last summer (before it was clear my previous GC would not hit the target date)...the only interest I got for the house was from last-minute grad students and very few of them...again...covid actually created more demand it seems.
@Justin Thorpe I agree this risk is real but also believe there with probably be some consolidation in the space over the next 10-20 years similar to what going on now in big-box retail...border gone and Barnes & Nobel pick the leftover...circuit city & best buy etc...the top-ranking colleges and the affordable ones will do well while the others will go through hard times...for the landlords, it doesn't help that many colleges also go into the housing business...in one of the markets I considered, a new complex was just completed and removed the demand for about 80-90 SFH in one year.
@David London
I agree and the trend is unfortunate. I think in between. physical retail and commercial RE plus college campuses shrinking, the overall price of RE could be in for a reckoning. Given how incompetent the system has been in tackling Covid, it’s likely a day of reckoning for many sectors except those that are digital or online.