Alternative rental options
A nice niche market in rental real estate is university housing for students. As an alternative to standard rentals, this form of property investment has its advantages and disadvantages. If you already live in a top university town, this type of investment could be perfect for you. Let’s take a closer look at whether this segment of rental investing is truly right for your situation.
Advantages of renting to students
One of the great advantages of student rentals is the ability to receive upfront payment for each semester period. So bad debt or collections can be reduced to very little in this segment. In addition, there is a constant flow of students in any given college town. So as most students become eligible to partake of “off-campus” housing (usually, universities allow this after a student’s sophomore year at school), it’s a good bet that you may have a student for at least one, if not two years. The less turnover, the easier it is to manage your property vacancies. Also, look for the ability to charge top dollar for student housing, as well as being able to collect several rentals into a single building, since students traditionally rent out rooms in the building, and share common costs.
Keep in mind that the “hotter” the university town, the greater the demand. Top student towns like Boston, for example, are major student hubs, and greater demand for student housing will invariably produce greater rent rolls and cash flow, in addition to increasing market valuation over time.
If you have children that are about to enter college soon, it may be a great time to consider investing in student housing. You can ultimately save on student room charges while they attend school, and then when they graduate, continue to rent the units out to new students. This assumes you’re going to buy in an economically viable hub college town, and not in a depressed area, with few if any, local colleges.
Disadvantages of student renting
Make sure you try to rent to upperclassmen and graduate students. Remember that maturity is a big asset in student renting markets. The more mature the better. In any event, even if you’re an absentee landlord, you (or a designated managing agent) will need to keep close tabs on your building with regular visits to ensure things do not get out of hand. I mean, students do party – and that will have a taxing effect on any building. Make sure you have adequate insurance on your building at all times in case of extreme emergencies.
Some negative factors to consider in renting to students is the down time between semesters. This is lessened if you buy in college towns that run on trimesters – basically year-round schooling. Rent rolls should cover any down time when students return to their homes. Many landlords of student housing tend to rent for full years, despite the fact that students may not actually be living in them year-round. This is yet another reason to check on the building at regular intervals.
photos courtesy of rentseeker.ca, multifamilybiz.com, mpmstudenthousing.com, theguardian.com, massrealestatelawblog.com