Are you considering buying a home near a college or university? Properties that are located in college/university towns tend to offer some unique opportunities for investors and residents alike, where the advantages are vast but consequently, so are the disadvantages. Let’s have a look at the pros and cons to help you decide if a college town is the right choice for your investment
LIVING IN A COLLEGE/UNIVERSITY TOWN
There are many benefits to living close to a university as there are usually a lot of amenities such as grocery stores, restaurants, and activities. As such, urban planners understand that many students rely on walking or public transportation to get places so essential businesses are located within walking distance of a campus. Not only that, the university itself offers a wide variety of benefits. If you are interested in watching athletic events, plays and musicals or listening to guest lecturers this could be the answer to your prayers. While the amenities of a college town are seemingly endless, there can be some trade-offs as well. These disadvantages could include more noise and increased traffic during school and evening hours.
RENTAL PROPERTY PROS:
There are many positive characteristics to investing in this type of neighbourhood that can spike profitability.
In a college town, there is quite a large population of desperate renters. Each semester, new students enter college and need to find a place to call home. If you choose to invest in rental property, a college town can provide you with a large pool of prospective tenants to choose from.
The demand for rentals is high in college towns and this demand can help keep rental prices in the area strong even when other parts of the housing market are failing. In addition, off-campus housing is often paid for by the student’s parents, or even by the college itself, so you may be able to get a higher rental price for the property.
The high demand for rentals in a college town can also lead to fewer vacancies. There is always the next student or college employee looking for a place to call home.
LACK OF ADVERTISING
You will find that you do not have to spend much time marketing the area, because the area sells itself. There are many attractive amenities which draw people to college towns including; culture, entertainment, dining, shopping, and public transportation.
RENTAL PROPERTY CONS:
Now that you understand the pros of investing near a university, you need to consider the cons. There are negatives to buying investment property in any area and a college town is no exception. Learning about the not-so-positive can help you decide if they are things you can deal with or if they are not the types of issues you are looking to encounter in a property investment.
While there is a large rental market in a college town, these tenants are often short term – staying in town while they are attending school or working at the university and then move on. Many students often split time between on-campus housing and off-campus housing over their four years and typically change housing each year. Get ready for high tenant turnover!
Student renters tend to move a lot and there may be times of the year that you won’t be fully rented. Since fewer students attend college in the summer, you could be looking at vacancies during the summer months. One way to plan for this is to have all your tenants sign a twelve-month lease instead of a month-to-month lease or a nine-month school year lease. This way the tenant is responsible for paying you whether or not they will be living there during the summer months.
WEAR AND TEAR
Generally speaking, college students can be quite destructive when it comes to their living space. Property damage is very common and is often more than the amount you have collected as a security deposit. Damaged floors, holes in walls and broken cabinets, doors and even windows are not unusual when renting to some college students. As with any investment, you will need to look at the costs vs. the income. Again, speaking in general, college students tend to be less responsible for their living space and don’t always consider the effect that their lifestyle may have on your investment.
It is important to realize that investing in a property in a college town is not usually a passive investment. If you choose to manage a property by yourself, be prepared to be the one to collect rents, perform maintenance, perhaps maintaining the yard, and finding new renters on a regular basis. You may even be called upon to mediate roommate struggles, the truth is, you never know what you’re going to get. If you choose to use a property management company you may be charged 10% or more, depending on how many properties you own. You will have to determine if being a hands-on property investor is the right fit for you.
While many people assume that renting to college students means dealing with late payments and constant parties, however, that is certainly not always the case. There are many responsible college students looking for a secure place to call home while they complete their education. You simply need to make sure you screen applicants and verify their source of income. Contact me today if you’re considering an investment property or want to speak further about any other potential real estate opportunities!