Real estate is one of the most common ways of passive income. Many people understand that their primary residence is a sort of investment. Others choose to repair old houses and sell them for a profit or buy several houses to rent out. No matter what method you choose, investing in real estate is always a good way to earn money.
If you’re already familiar with this kind of business, then you know that location is the most important factor for those who generate wealth in real estate. It’s not enough to just buy property, you need to buy property in a certain area. Some neighborhoods and streets are so popular that the value of your property grows constantly, therefore, increasing your chances to sell it for a good price. It’s important to know what areas in your town are the most popular so you can form your own real estate strategy.
Another important thing to consider is a stable market. If you’re looking for good income, you need a growing market that you can rely on. Thus, you need to find an area where properties don’t wait to be sold for longer than 3 months. In this case, college towns look like the best choice.
Why Is It Smart to Invest in College Real Estate?
Some people are afraid of college towns, thinking of them as of temporary party centers for youngsters. However, smart investors understand all the benefits of buying in areas near universities and colleges. Here are just a few reasons to invest in college towns.
1. A big tenant pool
It’s hard to find a place with a bigger population of renters. New students come to college every semester, and all of them need a place to live. Buying rental property in college towns, you will always have a big pool of renters to choose from.
2. College towns are easy to sell
You won’t need to spend a lot of time and effort on marketing. This area promotes itself, it has numerous activities, like sports events, art exhibitions, and entertainment. There are many restaurants with all sorts of food, small local shops and chain stores located close to home. Another reason why college towns are good is a system of public transport.
3. Stable rent
There is always a nice demand for rentals near colleges. Here, rental prices remain strong even if there are problems in other areas of the rental market. Given that the college and parents often pay for housing, you can keep rental prices for your property even higher.
4. Low vacancy rates
When some student moves out, there are always other students ready to move in. However, vacancy rates grow during the school break, so we suggest asking tenants to sign year-long leases.
How to Buy Property in College Towns
There are a few important things to consider before buying property near universities and colleges:
- your long-term plan and the recent dynamics of the market in the town;
- small college towns that are far from big cities are usually more profitable;
- a particular school: the difference between the number of students who live on campus to others, the amount of school housing owned by the school, rental rates, etc.;
- public universities have higher enrollments and less strict housing policies than private schools.
Your rental strategy, in general, depends on the cost of a single-family home. You can either buy a place and rent it as is, or you can take other expenses and turn this house into several rental units. The prices vary dramatically in different states, for instance, average prices in Indiana are about $148,000, while at the University of Colorado this number is equal to $453,000.
However, there are a few people in Colorado who can afford to rent so expensive places. Jason Malerson, a creative writer from Masterra and concurrently working in real estate as in his primary area of expertise, emphasizes: “In Colorado, average income is higher than in Indiana but still not high enough. So, do you need to buy a cheaper home in Indiana? No, because you don’t need to focus on the places out of the range from 75% to 110% of the average value.” Thus, your lower limit is $340,000 — still more than the average price in Indiana.
Buying a house in Colorado, you will need to subdivide. On one hand, it means that you will have to wait longer and take additional expenses. On the other hand, this method offers you benefits of long-term investment. Average rents are about 20% of local income, which means that every object of your property is able to produce roughly $15,000 a year.
As for Indiana, here you can also subdivide, but it would be better to rent out your house as is. Here, the average rent is about $10,000 a year, which is a nice return by itself. However, if you have three or more bedrooms, you can charge much more and find more tenants. The main thing is not to charge lower than the average price, because otherwise, you will face the undergraduate problem. Undergrads are associated with many problems, and the most important of them is that they won’t keep your property in shape. You can always find graduate students and a plenty of administrative staff who are not only solvent but also interested in maintaining their good reputation.
Investing in real estate is somewhat a challenging thing. College towns don’t free you of the risks associated with real estate, but this kind of property allows you to avoid the most expensive risks. You will benefit from a stable market that constantly grows. There is always a lot of people who are looking for places in that area, and the value of your property will keep increasing, which is a good reason to consider this sort of investment.
Author Bio: Berta Melder is a brand manager and co-founder of the Masterra Writers. Berta cooperates with different education courses covering a broad range of digital topics as a guest lecturer. She enjoys creative writing and blogging. Follow her on Twitter @BertaMelder.
If you liked this article, subscribe to Rentometer's email newsletter to stay up-to-date on the latest trends in rental housing.