Anyone with Experience in College Rental Properties?

10 Replies

Wife and I are looking to purchase some properties near a University.  Wondering if anyone can give us so lessons learned or advice.  

Thanks!

Paul

@Paul Klaas I own some apartments in a town with 4 colleges/universities. So while I don't exclusively rents to students they do make up a good portion of my tenants. My personal perspective is that you have to decide if you are going to rent to students that "want to save for beer money" or students that aren't. You can *probably* be successful with either but you have to manage your expectations. If you have a lower end rental that you rent out to students cheaply, don't be surprised if they construct a homemade bar in the living room. If you have a nice(r) 8 unit building with 1 bedroom/1 bathroom units that rent for a premium it will be a little harder to find tenants but in all likelihood you're not going to be the go-to location for keggers, beer pong, and homemade bars. Where I think you'd risk getting killed is you were caught in the middle. Since I don't live in the market where I invest I stick with the "nicer" stuff. The ROI isn't as high as if I had opted for lower-end SFRs across the street from campus but I don't have to anticipate a $5K cost at unit turnover. That said, I don't think it's a materially "bad" idea to go that way if you can build it into your financial model.

I concur with Andrew, I also owned apartments near universities and they did rent quickly, but the quality of tenants was lower and they did cause more damage than non-college apartments.  I used PM's and they would try to get parents to co-sign since the renters had no history (and try to stick parents with the bill if their kids damaged the place).  Good luck!

@Andrew Johnson @Russ Draper Do you guys think that if we did a nice rehab on the property, we may be able to attract better student tenants?

Thanks Andrew and Russ.  I think it maybe more of a hassle especially since we are probably going to be investing out of state.  Great point about nicer apartments.  I can only imagine the destruction that can take place within a rental property.    This would also be my first investment property.  I am confident we could handle the work associated with it, but not sure if the juice is worth the squeeze.

@Paul Klaas "Juice being worth the squeeze" is probably going to be a concern regardless of student vs. non-student tenants.  But if I were investing in those properties close to campus I'd want to visit fairly frequently AND make sure that I had a solid property manager.  I think a lot of the stories here about being suckered by a property manager are a little overblown.  I'm sure they're true but you seldom here about a "good property manager" and plenty of them exist.  That said, a PM isn't going to drive by randomly on a Saturday night to see if there's blaring noise coming from the house and no applicant is going to ask "Can I have 4 extra cars park on the lawn?"  

That said, I do think it's possible to make the property nice enough to command better renters.  If a student is consciously making the choice to spend $700 per month vs. $500 per month for a better home and less beer money, I'm sure it's for a reason.  What's probably more practical is making sure that any student rental has tile or that polymer "wood look" flooring.  I don't think I'd want carpet, natural wood, etc. just because I think "beer can's will get tipped over".  

I have a had a student rental for 13 years (A SFR rented by the room). My experience has shown that being 1.5 miles away from campus/bars means you filter out the partiers, the "stumble home from the bar" types, you reduce the flow of people randomly dropping by because it's close to class, etc.

Another thing - space. If your rental has a large open space, it *will* be used for parties. A huge living room/basement is not a plus when you are shopping for that first rental, unless of course you reduce that party space by turning it into an other room to rent. Dining rooms are great for this. 

Renting out room by room means a bunch of unfamiliar people living together, and they are less likely to plan get togethers, etc. Renting to a group who are friends equals a more social environment and greater potential for parties/damage. I like to say that my house is full of "busy mice" - quiet seniors/grad students who focus on work/school/sleep & cause few issues. Good luck!

@Paul Klaas

Renting to students can be great if you know what you are getting into. Make sure you learn the neighborhoods well. There will be areas even near campus that it is hard to attract quality student tenants. Often for the reasons you would think like crime or neighborhood restrictions against student rentals but sometimes they are just not thought of as an area where students live. I like looking at off campus university bus routes as a starting  point for where the students are living. Also, if the market is student dominated make sure your lease corresponds to the university schedule and it is for a entire year. You don't want to not collect rent over summer. The higher end of students are getting more selective so if you get a nice place make sure the number of bathrooms is close to the number of bedrooms. 3/2 is okay for medium nice but if you want premium rent you with need at least even like 3/3 and often a half guest bath. A 3/1 will still rent but understand you are not going to get the high end of students so don't make the finishes high end either.

Reading your posts brings back some bad memories. Do not rent to college football players!!! We are out of state owners of a small SFR near a large university and event center. We actually bought the house for the parking [the parking alone covers half a years rent] plus the house rental. We rented the house to two full scholarship university football players, thinking they would have a school income stream to always pay the rent. Wrong. After the first month, they pretty much stopped paying and the tragi-comedy ensued. They always had an excuse about the school "messing up my check." Since we know nothing about dispersals from college athletic programs we let it slide. However, my wife got the number of the offensive line coach and started calling him personally. He always said he would do what he could do. Nothing. So instead of flying out and evicting them, we let it slide, hoping for the best. The football team makes it to the Orange Bowl and my wife is so mad she calls the Offensive Coach during the final two minutes of the game. He actually picked up the phone and she said "where's my rent!!!" After the game, one of the football players splits [never to be found] and the other goes pro. He got on a plane and left everything behind, literally everything. I called him and he said 'keep it all, I'm a pro now." I donated everything to the DAV and surveyed the damage. They had been raising pit bulls [he was a friend of M. Vick from GA] and growing cannabis in the backyard. The house was completely destroyed. The happy ending: My wife got a call from the boy's agent saying they didn't want any trouble. They paid all the back rent [3k] and lost their damage deposit. Sorry about the long post. It was painful learning experience.

Good to know.  Sounds like a lot of the same rules apply.  Good location and nice improvements to attract better renters.  And never rent to football players haha. 

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