We have a new blog!

Visit us at rentometer.com/blog to read our latest articles.

April 28, 2017

Owning rental property near a college or a university might seem like a license to print money, but it has drawbacks too. Here are the pros and cons of investing in student housing.

Pros: The most obvious benefit is a steady stream of potential tenants. After all, few kids buy a home when they go off to college, they rent instead. Further, many schools require scholarship athletes to live within a specific radius around the university as part of their package. You’ll have plenty of applicants for your vacancies.

Steady demand means stable rental rates, even as they fluctuate in other places. Additionally, their parents typically pay the rent, so you’re practically assured of reliably timely payment. Some form of financial aid usually covers those whose parents don’t pay, so the financial aspect is practically guaranteed.

Marketing can be simple if done well. Advertise on the school’s website, emphasizing your proximity to the institution as well as nearby entertainment, shopping and activities. Your website also needs to be strong, because that’s the first place students look. Here is a free rental property-marketing guide you download.

You can time your leases to begin and end at the close of the school year so when one group of students finishes school, your place automatically becomes available for the incoming class.

Cons: In most cases, we’re talking about kids who are living unsupervised for the first time. There will be parties. There will also be roommates with whom there will be disagreements and as the closest responsible adult, you might be called upon to referee You might even have to decide which one stays and which one goes — should irreconcilable differences arise.

Kids on their own for the first time might also find changing the battery in a smoke detector to be something of a challenge, as well as cleaning regularly or being aware of potential maintenance issues. You’ll have to keep a closer eye on upkeep.

These factors tend to translate into more wear and tear.

You’ll go through flooring more quickly, you’ll have to paint more often and you might even find holes in walls and doors. In many cases, it’s likely to be more than will be covered by a reasonable security deposit. To counter this, your lease agreement should specifically state excessive wear and tear incurs additional financial penalties. Bring this to their attention at signing and have them initial that paragraph of the agreement which can be found here.

You should also require renters insurance, point out the key clauses in the agreement (including when rent is due). You’ll need to make sure they understand how to file maintenance requests and define unacceptable behavior for themselves and their guests. You must also be certain they clearly understand the consequences of noncompliance.

The pros and cons of investing in student housing make it an endeavor best left to active managers rather than passive investors. While the upside is a steady income stream, the downside is accommodating the maturity level of most of your tenants.

Ultimately, whether or not it’s worth it is up to you.

Related: Top 8 Things To Look For When Screening Tenants

Onerent is a rental leasing and management service for the modern owner and renter, managing over 1,000 properties across the San Francisco Bay Area, and Greater Seattle. Onerent offers free real estate education and resources on the Build with Onerent Blog. Find answers to all your legal maintenance finance and leasing questions as well as real estate news that affecting the housing market.

If you liked this article, subscribe to Rentometer's email newsletter to stay up-to-date on the latest trends in rental housing.