Real estate investment in a college town
Salt Lake City, UT · Member since 2017 · 15 posts · 7 votes
Thanks @Dustin Frank for the response.
- Were those properties single family homes, multifamily plexes?
- Did you budget more money for for repairs, since the students can be a little rough on the property?
- Right now I'm estimating a 12% vacancy rate. Do you think that is reasonable, or should I estimate more?
- About how much rent were you charging?
I think student housing is a great idea. You have a somewhat captive tenant pool, and the 'rents usually have to co-sign. And you sign a lease for the full year. A lot of those kids are going to hang around for the summer anyway, as opposed to traditional dorm students.
The only caveat is that it should be walking distance or a short drive or bike ride to campus. You can't buy someplace 10 or 15 miles away from campus and try to market it as student housing.
@Jordan McDonald great advice from @Dustin Frank. I have a college student rental property business that caters to over 100 students and have been doing it for over 10 years. The market knowledge of when to lease is absolutely crucial. There are some times early in the Spring that I can properties for 20-30% more than I could later on in the summer. It took me a long time to figure that out.
Also, I would be hesitant to recommend student rentals to anyone unless they're able to enforce boundaries very well. Students are an absolute nightmare if you allow them to be.
Thanks @Dustin Frank for the response.
- Were those properties single family homes, multifamily plexes?
- Did you budget more money for for repairs, since the students can be a little rough on the property?
- Right now I'm estimating a 12% vacancy rate. Do you think that is reasonable, or should I estimate more?
- About how much rent were you charging?
My advise would be cheap but Nice....Many students look at properties with their parents so get something that the parents don't think is gross.....Hint HInt, Parents that look at properties with their students are usually the ones that pay the rent for them each month...on time that is!
I do student rentals in a SFR room by room. Students pay a premium, so if you have partial vacancy in the Summer, you can often absorb it. I find out who is leaving for Summer and then try to rent out the vacancies to Summer session students. Moderate security deposits help to absorb cleanup at move out time (renting to families with messy kids/pets can sometimes be more of a mess than students). Couple of rules to implement: no pets, no significant others staying over more than a weekend's time, no mini fridges or heaters. And get lockboxes for the thermostats. Good luck!
@Jordan McDonald Here are the two main ones:
1) Late rent:
Be relentless about enforcing late fees because they'll be consistently late if you don't. I charge $150 per house if they're late and will not bend on this. Usually 3 or 4 months out of the year I will have 130-140 students that will all pay their rent on time. The other months it's usually only 1 or 2 late payments. It's because we're very, very strict about this.
2) Communication:
I would be very hesitant to not to give them specific instructions on you to communicate with you. If you give them your cell phone number, they will text you at all hours. We set a policy that all of our communication goes through our property management software outside of normal business hours. Students have no clue what 9-5 means so you'll need to instruct them on that.
@Jordan McDonald I'm invested in a college town but I don't rent to "only students" or "primarily students" or "never students". So with that in mind you have to keep in mind that college towns do have a cycle for renting next year's apartments. Don't be surprised if leases are signed in January for the following year. It's a little weird but once you the cadence you should be fine. There's nothing to stop you from offering a 12-month lease at $600/month or a 9-month at $800/month. You still get the same gross collected rents and you just live with the vacancies or attempt to rent (at that time) to students in a summer session. That said, college students are basically a unique bunch. What you don't want to end up with are the last-resort college students as they'll usually be harsher on your unit, collecting rent will be troublesome, etc. So don't be the cheapest game in town. Likewise, renting 1 bedroom/1 bathroom units is a completely different ballgame than renting a 4 bedroom home to 5 students. Party-central is never going to be the 1 bedroom/1 bathroom so if you're taking a keg to watch a college football game, it's not going to be in those cramped quarters...it's going to be at that house. And you also (if you're going to mix students with families) have to go beyond thinking about just noise issues but think through parking situations. If you flood a 4-plex with 12 students you probably need at least 10 parking spots. Odds are you don't have that. It's not the end of the world for students but if one unit is rented to a family, mom won't want to deal with street parking 2 blocks away from the students have 10 cars competing for 6 spots and street parking. Anyway, just food for thought.
Reading from your initial post, are you house hacking this?
I think you may be in for a rude awakening if you are trying to house hack a 4-plex with students. Not only will they be your tenants but your neighbors, with shared walls?