When it comes to real estate investing, there are no set rules to building your portfolio. New investors may prefer working on rehabs and flipping properties to earn quick profits while those with experience may favor long term investments such as rental properties. Student housing rentals is one of various options that fall under the long term investment category.
When done wisely, student housing rentals can be quite profitable. These properties are generally situated close to college campuses to make it easier for students to get to and from their classes. Like any other investment, student housing rentals has its pros and cons. If you’re willing to invest the time and effort it takes to find, buy and manage these rental properties, this could be a lucrative venture. By weighing the pros and cons of buying real estate to convert into student housing rentals, you can get a better idea if this type of real estate investing is for you.
Rental properties close to colleges and universities are generally in high demand. Students that don’t live on campus usually look for places to rent within close proximity of their school. It’s not unusual for several students to get together to rent a house or apartment to save on money. This makes student rentals a low risk operation as housing is always in demand.
The high demand for student rentals also means landlords can charge a decent rent to get a good return on their investment. If you sign up students early on in their college years, you could have solid tenants for several years to come, depending on their degree program. Long term tenants can bring in substantial income over the years, dramatically increasing your profits.
Student rentals don’t have to be luxurious – basic housing will do. Most college students don’t expect to live in luxury houses or apartments. Naturally, you need to keep up with the maintenance of your rental properties. But other than basic repairs, you don’t need to make major overhauls.
Furnished rentals may be more conducive to college students who have little time (or money) to invest in furniture. If you furnish your rentals with basic living, dining and bedroom furniture and major appliances such as refrigerator and stove, you’re more likely to attract tenants to your properties. You can add the cost of furniture to your rent to make this investment worthwhile.
If rental properties are going to be a part of your real estate investing portfolio, you’ll need to hone your management skills to properly run your rentals. You’ll have no trouble finding and keeping tenants if your student rentals are managed well. Proper management includes keeping up with maintenance and repairs, looking after landscaping, checking on properties, handling disputes between tenants and collecting rents on time. These are skills that can help you become a more efficient and professional investor.
When it comes to collecting rent, you can avoid problems with late payments by being selective in choosing your tenants and getting parents to back their kid’s lease. Your lease should specify when and how rents are to be paid along with consequences for failing to comply with the rental agreement. Make sure students fully comprehend their rental responsibilities so there are no misunderstandings if problems arise.
Young college students aren’t exactly known for their stewardship or budgeting skills. As a result, they may run late in paying their rent or fail to notify you when the refrigerator or stove starts acting up. If your tenants use the property for parties or social gatherings, don’t be surprised if your furniture begins to show signs of wear and tear sooner than you expected. Your unit could also suffer minor damages from guys wrestling in the living room or tossing around a football while trying to study.
If you don’t have the time or temperament to manage student rentals on your own, you’ll have to hire a property manager. This will cut into your bottom line. Most students know very little about running a home. As a result, they may wind up calling you for every little issue that comes up. If you don’t want the hassle of dealing with students and their rental problems, you have no choice but to hire a property manager.
On the flip side, there are also students that ignore problems until they become major issues that are costly to repair. Even if you’ve asked your tenants to let you know when electrical or plumbing problems occur, they may wait until the toilet’s run up a huge water bill or electrical outlets are smoking before reporting these issues. With student tenants, you need to be prepared for any eventuality. You just don’t know when a small problem will escalate into a major emergency that costs you hundreds of dollars to repair.
Noise is yet another “con” when managing student rentals. Students are notorious for throwing boisterous parties, even if parties aren’t sanctioned in their lease. If the party gets out of hand or goes into the wee hours of the morning, neighbors may call the police. Disputes with neighbors could give your rental a bad reputation. Parties also pose a risk of students causing damage to your property. If the situation gets serious enough, you may have to evict your tenants before their lease expires, which means you would lose out on rental income until you find a replacement.
Not everyone can handle the responsibilities of student housing rentals. Before buying real estate to convert into rental properties for students, take time to count the cost. Consider all your real estate investing options and make sure this is the one you want to dedicate your efforts and time to. Student rental properties have much to offer in the way of financial gain. At the same time, they’ll require a lot from you in order to get a good return on your investment.
By finding the right property and combining it with the right tenants, however, you could make student housing rentals worth your while.