Decrepit SFR's in College Towns, (Observations on Santa Cruz)

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Decrepit SFR's in College Towns, (Observations on Santa Cruz)

Jacob Y.
Santa Cruz, CA · Member since 2013 · 19 posts · 1 vote

Hey Everybody,
I was curious to hear people's thoughts on the following: I live in a town with a strong college influence - Santa Cruz, California. About 17k students here, 60k or so residents in Santa Cruz City. This creates an interesting sub-market of rentals, and there are a few distinct problems that I see, and was curious to hear what people have to say about this, anything to add, etc.

Since the University houses 750-1500 students on campus, many of the rest rent houses. A SFR market emerges that looks like this: crappy houses that can command a high rental price by packing students in, often in illegal structures, basements, converted garages, trailers, vans, tents, whatever. Now, not all of the landlords are slumlords, but many certainly are. Some houses are quite nice, but many are decrepit, and command the same or more than a much nicer SFR next door rents for. Now, obviously I can see that students are problematic renters, but I have heard some amazing landlord stories and seen some incredible living situations. Basically, there are a lot of people being taken advantage of, spurred on by market conditions.

Another aspect to it is that students are dispersed through-out all neighborhoods, and are often hated by neighbors (understandably of course, but it is a situation created by the university presence). Santa Cruz has a unique noise ordinance in that police do not have to provide a warning before writing a hefty fine for a noise complaint. Those houses can then be red tagged, and future (unaware) renters can be fined at the second level without any notice. This is a fascinating dynamic and creates an unpleasant tension between students and residents in many neighborhoods.

I see big problems with these things on many levels. Not only this, but the University of planning expansion. Comments? Possible solutions? Anybody else living in University towns? Very curious to hear your thoughts. Thanks!
Jacob

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  • Ben Skove
    Cincinnati, OH · Member since 2013 · 292 posts · 81 votes
    13y

    I grew up in a college town, and live close to an urban university now. I haven't marketed to students (yet), but one thing that I have seen in both places is an explosion of new townhome/condos, all pretty high-end with all the bells and whistles. This appears to be siphoning off all the more affluent students (or students with affluent parents, I should say.) Also, there are also a lot of new apartment complexes geared towards students (free wi-fi, shuttle transportation to campus, etc).

    This seems to be pushing the SFRs in two directions: high-end and low-end, with not much in the middle. Because of the new properties on the market, SFR rents seem to be somewhat stagnant. There are certainly a lot of decrepit properties of the kind you describe; on the other hand, a recent fire in which two students died has put a spotlight on these practices.

    What I see in my hometown is what appears to be major overbuilding. It's a big state college, and they're not building any more on-campus housing, but the amount of student-oriented apartments/etc being built is unreal - it's as if the last five years never happened. Personally, given that I feel that universities are going to go through some major challenges in the next decade (facing online competition, MOOCs, student-debt challenges, etc.) I'm hesitant to get into any student-oriented housing that wouldn't be strictly short-term.

    With that being said, if you're looking for quiet student tenants - market to grad students. They still will do dumb things, but generally they're past the wild party stage, they're more responsible, and appreciate quiet. I can speak from experience, though, that their income is low, so you'd have to have an appropriate property.

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  • Rian Chung
    Redmond, WA · Member since 2013 · 9 posts · 0 votes
    13y

    I have always liked the idea of college town investing but it certainly will depend on the college. My school in DC was a great place to have a condo. They were always rented with a large waiting list due to the location and lack of on campus housing. The other benefit was that most parents were picking up the bill.

    Ben is correct though, University are going to be going through a little bit of soul searching in the next few years. The price to value is really getting out of control and will need to correct or be disrupted.

    I would do research (which it sounds like you have) and go for the more expensive and higher income students. All universities have a diverse set of demographics and you can probably find what is the most desirable area or property to attract those students. So in essence, buy the home to attract the type of tenet that you want.

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  • Scott J.
    San Juan Capistrano, CA · Member since 2011 · 114 posts · 34 votes
    13y

    I own a rental near a very expensive private university in Southern California and have had nothing but great experiences. Mom and Dad always foot the bill, and pay on time every time. Plus the rents are through the roof. My 600 sq.ft. 1bd/1ba rents for $1,150.

    It's funny because the vacancy times to avoid are the opposite of regular rentals. You don't want June vacancies and December vacancies are a breeze to fill.

    Plus the university has a system where students can be punished (not sure how) academically if noise complaints are filed with the school, so kids don't get too crazy.

    So I guess a lot of it depends on the university.

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  • Jacob Y.
    OP
    Santa Cruz, CA · Member since 2013 · 19 posts · 1 vote
    13y

    Hey,
    Thanks for your response guys, definitely some things to consider. Ben Skove - interesting point about universities facing competition. In Santa Cruz, however, the university has been planning and fighting to expand for the past several years. Curious to see what that does to housing around here.

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