Rent a house to college students? Should you do buy and hold real estate investing near universities.

by | Indiana real estate, Indy Anna, Real Estate Investing

Rent a house to college students? Should you do buy and hold real estate investing near universities.

Real estate investors should know about buying rentals, doing buy and hold investing and being a landlord near universities and renting to college students.  Is it a good idea?  Today we discuss.

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Renting  a house to college students?  Pros and cons to renting to college students, should you do it, how to do it and why some investors love being university landlords.

Indy Anna explains:

  • Should you rent to college students

  • How to safely rent to college students – five KEY landlord tips

  • Why some investors make this their ‘bread and butter’ renter pool

We were recently  asked about renting to college students in buy & hold investments, specifically if this was a good idea or not.  I asked a few of the folks from out people page at BigReia.com/people about this.  Here are the answer I got.

Should rent to college students?

The first thing that runs through the minds of many investors is wild frat house parties and total property destruction – but there is a ‘beyond this’ outlook to it too, and it can actually be a decent idea in some areas. 

Most of the time having a buy & hold investment in a college town, you can be assured of a decent size tenant pool- for both student and faculty alike. The draw for students living ‘off campus’ is huge, especially as housing costs mount for some schools (it’s just more logical to rent with others and split costs in a lot of cases). 

There are a few different types of renters college towns can provide:

– Typical ‘in session’ student renters

– Year round student renters (usually those out of state or from abroad, or university/residency renters)

– Faculty/staff renters 

Your typical ‘in session’ renters are going to make up the bulk of your tenants in most cases, and this can be a pretty ideal scenario. They are in most cases not looking for anything fancy, and a house offered at ‘apartment’ level finish would work in most cases. Meaning they usually have their parent’s predetermined budget in mind, so cheaper is better.

In most cases this means you won’t need to dump in a lot of funds for updates- just the basics that are in good repair usually work. Only in areas that are bringing in more money for tuition (such as private college/universities) would it be considered advantageous to ‘compete’ with a few upgrades (basically keeping renters closer to a lifestyle in amenities they might be used to)

The perks of being a landlord to college students in this situation are:

  • Minimal ‘basic needs’ updates only needed most of the time

  • Rent often paid by someone else (first bank of Mom and Dad in a lot of cases)

  • Never really a need to market property/have scarce renter pool

A lot of folks are worried about the lack of credit history with student renters, worried about property damage and this is the key to help with that;

1.) Add the parents/legal guardians to the lease and screen their credit/background just the same as any other renter.

2.) Get the maximum allowed by your state in terms of security deposit.

3.) Have utilities paid by renters (this lessens the likelihood of seasonal utilities being out of control)

4.) Use an app/online payment system to ‘remind’ of payment due/accept payments automatically (like AHC deposit)

5.) Use an online (or even via text on group with co-signer) to report damages/issues

6.) Use this same app or text thread to respond to anything abnormal/red flag likes noise complaints, too many overnight guests etc- keeps a ‘report’ in to parents as well and can be used as leverage for offering ‘responsible housing’

7.) Offer a GPA discount; this sounds silly maybe but it takes responsibility to make good grades and carry a higher GPA. Car insurance companies do the EXACT same thing for this very reason- it promotes responsibility. For incoming Freshmen, senior year GPA’s will work just the same.  

This covers your property for not only rent payments, but also any damages in most every case. 

In terms of what happens during summer break to the renters? This is a time where you can consider Airbnb options as well as your yearly rental income kind of leveling out ‘offseason’ payments. If you’re much closer to campus and know walking distance will allow you to charge more rent than a house 10 blocks away, while purchase price is the same as other siad house, use this difference in charged rent ‘in term’ to help offset your ‘off season’ bottom line. 

You might consider breaking down the rent in a more ‘per person’ way than a monthly flat fee as well- and this can increase your monthly ROI quickly. As this is a common place practice, just make sure you’re competitive, and don’t overprice yourself out of the running. 

Repeat renter discounts?

One more commonplace thing is to offer a discount for repeat renters- especially those that are in good standing – this would be like a ‘discount’ for signing a new lease agreement at the second semester end of one year, for the upcoming fall semester etc.

Keep in mind too the perk of ‘family’ discounts along these same lines and renting to siblings (again, if you know parents are qualified co-signers- you’re setting yourself up for another good renting situation in most cases)

Month to month tenants.

You could also consider a month to month with another tenant during this time as well- just be sure to let them know in advance and screen them accordingly before going this route. Bottom line is, you can account for year round payments, even while school isn’t in session. 

Renting to faculty, out of state students, students from abroad and more of year round (such as residency) students will not carry the same short term renter displacement, but may require a higher level of finish in some cases as this becomes a year round home.

Perks of renting to university faculty: 

– Year round rent under the same renter/ as your lease terms apply

– Some renters having supplemented housing stipends paid in the form of allowances, stipends, and other arrangements 

– Lesser degree of potential property damage for those in graduate/residency programs (simply based on age and maturity – again, use the automobile industry here in why most car rental places won’t rent below age 26)

– Less need for obtaining co-signers (allowing tenant to solely establish some credit history as well)

When your tenets do move on and out, as a ‘thank you’ for being such great renters for the span of their academic career, it can be nice to offer a letter of reference as well for future renting needs. Informing your tenants you’re willing to do this is simply one more reason to be kind to your property as well as make timely payments. Not needed or necessary, but can be nice to offer! 

So, to recap when it comes to renting to college students:

We covered the reasons renting to college students can make sense for some buy & hold investors, what to be sure to include on the lease agreement in 7 KEY tips, AND how to make money year round with college/university town rentals. 

If you have any questions on this or buy & hold rentals near colleges/universities in Indianapolis please let me know.

And as always, 

Make the universe SMILE.  = )

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