Are College Student Rentals Actually Worth It?

Question

This weekend I was in my nephew’s college graduation and something caught my attention from an investment perspective.

He was living in a 5-bedroom / 2-bath student rental house that honestly was in pretty rough condition, yet each student was paying close to $1,500 per month in rent. That puts the gross monthly income around $7,500 on a single property, and from what I understood, many of the cleaning and maintenance costs are also passed down to the tenants.

It definitely made me stop and think. On paper, the cash flow potential seems very strong compared to traditional long-term rentals.

I know location and the specific college obviously play a huge role here, but does anyone here have experience with student housing investments like this?

How do they really perform long term from a cash flow and ROI standpoint? Are the higher rents worth the added turnover, management, headaches and wear and tear? Or does the operational side become more difficult than it looks from the outside?

Would love to hear real experiences from investors already in this space

Dominic Mazzarella · Answer

I’m not a huge fan of student rentals personally. The rent can look great on paper, but you’re usually trading higher income for higher management intensity.

The big things I’d underwrite hard are turnover, damage, parking, noise complaints, local rules, parent guarantees, and whether demand is tied to one school or one specific pocket near campus. A 5 bed at $1,500 per room sounds great until you’re replacing flooring, dealing with parties, chasing five separate tenants, or having one vacancy mess up the whole rhythm.

That said, plenty of people do really well with them. I’d just want a big enough spread that the extra headache is actually being paid for. If it only beats a normal rental by a little, I’d rather own the normal rental.

Kyle Mccaw · Answer

@Christian Garcia

The numbers can be very attractive, but student housing isn't as easy as it looks from the outside.

I've looked at buying near Texas A&M several times. My biggest concern is vacancy risk. If you miss the leasing season or don't get enough roommates lined up at the right time, you can end up sitting vacant for months. In some cases, you may not get another good shot until the next school year.

I'd also be cautious about markets where developers are aggressively building townhomes and houses specifically for parents to purchase for their students. Increased supply can put pressure on rents and occupancy.

The other factor is turnover. Most student rentals experience far more turnover than traditional single-family rentals. Every turnover means cleaning, paint, carpet work, repairs, leasing commissions, utilities, and vacancy time. Those costs can add up quickly and eat into the higher rent premiums.

Personally, I prefer traditional single-family rentals with longer-term residents and lower turnover. They're not as exciting, and the cash flow may not look as impressive on paper, but I sleep better at night. Boring can be beautiful in real estate. Less turnover, fewer surprises, and more predictable returns.

That's just my take. Plenty of investors do very well with student housing, but make sure you're underwriting the operational challenges and turnover costs, not just the rent roll.

Evan O'Brien · Answer

I have been doing student rentals for 22 years. It has ups and downs, but I cruise through a big chunk of the year with very little in the way of tenant needs. I started when I was 29, so I was just like these students in many ways, and even ended up living in a room in the house rent free for some time. The first and biggest thing I would say is important in a happy scenario is tenant screening. I have narrowed it down to a nice set of criteria and I never have issues with parties and rarely have knuckleheads causing damage. If you do a lot of work on the front end, your school years will be boring. I manage it all myself from a distance with the help of a handyman & assistant visits to keep things running smoothly and address small issues as needed. That being said, my first house cost 226k in 2004. The student house across the street from it is now listed for 475k. I want it, but man that price stings. The good news is that the price may have almost doubled, but so have the rents. Good luck!

Lacey S. · Answer

I have not personally had student rentals, but some of my associates have been very successful with them. I would expect a high purchase price and limited inventory if you are renting rooms for $1500/mo. That would be very high for my market, especially with shared bathrooms.

Peter Smith · Answer

I want to reiterate that I am generalizing. I am sure there are quality management options in select markets. In my experience, student housing has a lot of nuances and scenarios that cannot be systemized easily. A personal touch can handle these items more readily. Also, leasing cycles can be short and you may need to be quick to alter your marketing/leasing strategies. If the manager is not quick in relaying market changes, you may not be able to make changes in your end in an effective time range. If you miss the window you risk leaving rooms unrented for a full year. You are right that a quality manager will be expensive bc their work will require more effort on their end. The numbers may work for that or they may undercut your thesis of higher returns for student rentals.

I’m happy to jump offline to answer any questions as well.

Peter Smith · Answer

In my experience there is better cash flow and return on investment in student housing. However, as you mentioned, the management, turns, and general maintenance items will require more of your time and energy. I typically do not recommend student housing investments to investors that want to be passive. Student housing, even on a small scale, can be/will be a 2nd job. The reality is more money = more work. It's a trade off, like most things. I would say if you are okay with the increased workload, than yes, it may very well be worth your time. One item I do not recommend is 3rd party management of your student housing investment. This is of course, market specific, but generally speaking you are better managing student housing investment properties yourself.

Christian Garcia · Answer

I appreciate the feedback. Other than high fees, are there any specific reasons why you would turndown the 3rd party property management?

Are College Student Rentals Actually Worth It?

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