College Towns? Great Potential or Animal House?

Question

Thinking about stepping into a college town, possibly as a BRRRR or new construction/hold.  On the one hand, the built-in tenant pool is appealing, but on the other hand, I remember going to a party in college and a girl peed in the closet.  Thank you for any guidance you can share.

Bonnie Rhodes · Answer

@Cassi Justiz good point about overbuilt rentals. I graduated from Auburn University. I don't know the exact statistics on how many rentals were built, but massive property management companies came into town and built large apartment complexes. Meanwhile, the university was capping enrollment and not expanding at the rate at which they were enrolling. Maybe by 1000, but not at the rate that the apartments were being built.

With that being said, majority of the people I knew that lived in those apartment complexes did not stay in them more than one year. The newly built complexes were thrown up quickly and had a lot of issues with them. I'm sure it changes campus to campus, but upperclassmen wanted to live in houses off-campus. The houses within walking distance seemed extremely overpriced to me, but people will pay for it.

I have talked on a couple other forums about this topic. It is interesting and definitely varies by campus!

Jeff Manganaro · Answer

Graduate students and Medical students are easier to manage, though Undergraduate rents are sometimes worth the added yield. A tip to avoid an animal house situation; keep the basements off limits and stick with multifamily homes that offer limited common area space. Try to create an additional bedroom(s) if there's a large open concept. Not only will that boost NOI, it'll also keep the potential for large gatherings down, and the building in better shape long term.

Peter Tverdov · Answer

We rent to 400 students near Rutgers University. Rule with an iron fist and you'll be fine. Higher cashflow but larger headaches.

Jesse Mancuso · Answer

@Cassi Justiz Excellent points!

Tyler Bains · Answer

I am in Lubbock, Texas where Texas Tech is at. Our rental market has remained strong through COVID. Low volume of homes on the market, booming economics, and multiple community colleges in addition to the university have kept us going strong.

I think it really depends on the geographic location you are looking at. Towns that only have the university may not be the best bet.

Cassi Justiz · Answer

You can have rentals in a college town without renting to students. There are plenty of graduate students, professors, and university employees that also need housing. I have a rental in a student housing area that is not student friendly. It's a little farther away from campus, so I attract people that don't need to be within walking distance of campus. I've had university employees and graduate students, but I've never even had undergraduates apply for the house.

You'll definitely want to study the current rental market in that area. The college towns that I'm familiar with have all overbuilt luxury student housing and apartments over the past few years. Many students now have options to live in apartments for about the same amount as landlords were charging per room.

Marc Winter · Answer

Just read an article about rents decreasing in college towns/rentals because of a lot of virtual classes = less demand for housing.

We've managed undergrad rentals before and will not handle them again.

On the other hand, post-grads already got their partying out of their systems and are serious about getting that masters or doctorate degree--that would be the way to go student-wise.