Renting to medical residents/students?

Question

I've been kicking around an idea to get more cash flow in my local area, which I know very well. Specifically in the neighborhood where I live, it is an A-class development of 5-15 year old townhouses. We have a mix of young families, retirees, AND many medical students and residents who work at a major medical center less than 10 minutes away.

Average home value is $170K-$220K for a 2/3 bed, 2/2.5 bath townhouse. Average rent is about $1700 for a full house. So, not ideal for a traditional rental. I should also mention that the HOA is affordable and not susceptible to big assessments. Monthly HOA is about $50-$120 depending on the unit.

So what if I rented out a unit (say I acquire for $170K) and rent it out by the room to only med students and residents. Maybe I can rent each room for say, $700-$800, which would be a total of $2100-$2400...much better cash flow. I was thinking I could develop a relationship with the programs at the medical center as new residents and students come in they could refer them to me as an easy, cheap, and nice place to live with some roommates who work in a similar field.

Most nicer 1 bed apartments in my area rent for $900-$1100, so these tenants might look at this as a steal.

I know there are some people out there who specialize in this niche - can you chime in and let me know if I am thinking along the right lines? Do you typically offer these units fully furnished or not? How do you market to the target tenants? Any tips for management?

Thanks in advance!

Ariel Smith · Answer

@Kyle M. you are definitely on the right track with your thinking. I would want to know the average lease length that these tenants are looking for. Do they stay for a few months at a time on rotations or are they there for a traditional school year (August - June)? This will determine whether or not to offer the units fully furnished. I find that if tenants are staying close to a year, they typically have their own furniture and see it as more of a permanent move, as in they are not keeping another primary residence somewhere. If they are staying for a few months at a time, I would definitely offer the units furnished since it will be more of a temporary stay.

I think reaching out to build a relationship with the medical center is a great idea. For a rental I manage in my area, we have connections at Stanford Medical that reach out to my owner directly and ask her if she has available housing. They have an approved list of owners they contact when they need something in particular and she is one of them. Another way to market to this niche is through traditional avenues like Craigslist, Airbnb, VRBO, CHBO, etc. or by posting on the university's housing boards. There are also a large number of Facebook groups you can join to market your properties as well.

Travis Wylie · Answer

@Kyle M. I think you definitely have a great idea. I just spoke to a local investor the other day in Harrisburg who has had great success in corporate rentals. I have considered this for some of my apartments in Harrisburg with all the state workers, HIA, and some of the local hospitals (Harrisburg, Holy Spirit etc.). Due to your location I agree it would be smart marketing to reach out to the local medical center. I could be wrong on this, but I do believe that a lot of the corporate rentals tend to me furnished, but I could be wrong on that. If you do end up going to that extent and other profitable option may be AirBnB, Vacation rentals, etc. I've also heard on podcasts that AirBnB is starting to focus on corporate rentals too, but I haven't looked into that yet. Perhaps they may be able to help do some of the marketing for you. The thing with short term rentals is the constant turnover, but once you have the systems in place (i.e. local cleaning service, etc.) I've heard that these things can be very profitable, and I wouldn't underestimate your location as a more popular AirBnB location than you may think due to your proximity to Hersheypark and Giant Center.

Kyle McCorkel · Answer

Thanks for the thoughtful reply @Ariel Vincent

I know for the residents, they arrive in June and then will stay for 3 or 4 years. They are typically in their mid-to-late twenties. Some have families (not my target tenants for renting by the room) but many are single and looking for cost-effective but comfortable housing.

For the medical students, I am 90% sure that many of them stick around year round. And they will be in their early to mid twenties.

What you described as far as getting on an approved list of owners is EXACTLY what I want to do. This is extremely efficient marketing in my opinion. As soon as the residents find out they are coming to Hershey, they will want to find a place to live. Ideally they would have a resident coordinator or something who helps them get oriented who would give them my contact information (or in the future, a website showing the properties/pictures/etc).

Jim D. · Answer

Bummer about the rules on no single room rentals. It's a great strategy to get higher yield. You might still be able to do it just by having them all on one lease (i.e. have four singles sign the lease for $2800/month and leave them to divide the rent how they want). I'll leave it to you to figure out whether or not that would meet the HOA requirements.

I have graduate students in some rentals and they are fantastic tenants. Hardly ever home, very responsible, and when one of them moves out, the other ones find a replacement on their own because they want to choose who moves in. I've had almost zero vacancy in 4 years and only had to re-list a room once.

Adam M. · Answer

I live in a college town, Lawrence, and nearly all PM's and apartments here require parents to cosign leases. Also if that is your tenant I would make sure you use a management software that allows you to pay rent online so the parents can go in and setup recurring payments on their own instead of the parent writing a check to you or them writing a check to their child who writes a check to you. I've heard good things about Cozy.

Kyle McCorkel · Answer

Thanks guys! @Adam M.@Travis Wylie

I did look into the HOA rules for several townhouse communities in the area and they are quite restrictive with rentals. No lease terms less than 6 months (I.e. No AirBnB) and you cannot rent by the room. I liked the townhouses because they are a little lower price point than most SFR's in the area immediately surrounding the med center.

So, I will just have to look at price points a little higher or areas a little further away.

The other thing I was thinking was renting to PSU Harrisburg students by the room in Middletown. Cash flow looks good on paper, even with accounting for double the normal maintenance factor and higher PM cost.

Adam M. · Answer

Family member of mine has been renting out her first home (2 bed, 1k sqft) to a young doctor at KU med here in KC for the last 3 years and they barely see her. They just get the money deposited every month and go by the property for general maintenance here and there. Most everyone who works at hospital is high income/high education so a solid tenant profile.

Renting to medical residents/students?

Renting to medical residents/students?

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