A college town means college students. Which means young people who need a place to live. If you own rental property near a college, it’s only natural to explore the possibilities of meeting their demand with your supply. It can be an excellent business move. But it helps to know what to expect when you rent to students and how to make it a successful experience for all parties.
Supply & Demand
There are 20 million college students in the US. Most colleges have at least some on-campus housing. But as schools and enrollments grow, on-campus housing gets scarcer. Some schools address the shortage by offering on-campus housing to freshmen only and/or awarding housing by lottery. Which means that students who can’t get housing through the college have to find it elsewhere.
According to a U.S. News survey, 21% of first-year college students live off-campus or commute from home. At some larger universities, that percentage is much higher. And it doesn’t reflect the rest of the college undergrads, graduate-school students and professors who need off-campus housing. Enrollment at NC State University alone is about 36,000; central Raleigh’s off-campus population is estimated at 23,000. That’s a big group of potential tenants!
What Students Want
Students want a place to sleep and study that’s safe, affordable and convenient to school. Nothing fancy.
Because they usually spend a lot of time at school, students aren’t looking for the granite countertops or elegant finishes that would attract more mature tenants. They need a place that has working HVAC, no bugs, good locks, and secure delivery for mail and packages. On-site laundry is often a must. (Who wants to haul laundry to a laundromat?) The closer to school and the grocery store, the better, or at least near reliable public transit.
Be sure to run your contracts and leases by your attorney. There are several legal justifications for breaking a lease in North Carolina; “pandemic” is not one of them but consult your lawyer about this or other possible gray areas.
One thing students may be picky about is WiFi. Students need to access online libraries, databases and web portals for research and assignments, and they often need to video conference. They may also indulge in recreational gaming and streaming TV, movies and music. To be competitive in the student rental market you’ll need reliable, high-speed Internet service with high-capacity bandwidth that will serve everyone comfortably.
The Pros of Renting to Students
We’ve already mentioned one big advantage in renting to students — demand. Large numbers of new students every year means low vacancy rates, which tend to hover around 2.5% for student rentals. This is not only because of built-in demand but the things a college attracts: restaurants, shopping, sports and entertainment.
High demand and low vacancy rates can also translate to higher rental fees. The more convenient a property is to the college, the more rent it can bring. The more amenities you offer, such as storage or yard space, the more you can charge. Multiple tenants (aka roommates) for a single rental unit can translate to a higher ROI than a traditional rental to a single family. Off-campus rents may seem low to students who have been paying high fees for on-campus room and board.
Income from student rentals can also be fairly consistent. When students get their rent money from parents, and a unit has multiple tenants, you stand a better chance of getting at least part of your monthly rent if something goes wrong with one tenant.
With all that demand, students may do part of your marketing for you as they share information about vacancies and look for roommates on social media. When you market online, be sure to include photos and pertinent details for students to share. Some listing services will also distribute your listing simultaneously across multiple channels like Facebook Marketplace and Realtor.com.
The flip side of high demand is high turnover. Luckily, that’s offset by the steady stream of new students who need housing. But students can come and go with the academic year. To fill summer vacancies, you can allow sublets or offer short-term leases with discounted rates.
Having a large pool of potential tenants to choose from also helps insure against the other drawback of renting to students: a lack of maturity. Your rental may be students’ first experience of living on their own.
You’ll need to prepare yourself for inexperienced tenants. What if they’re late with the rent? What if they throw a wild party and damage property? Or prompt noise complaints from neighbors? Or invite other students to live with them? What if they don’t realize the need to report a leaking faucet to you? What if they break their lease? How do you make a total newbie understand what’s involved in renting and living on their own?
Minimize Risks, Maximize Returns
You can minimize the risk of renting to an inexperienced tenant with careful screening, requiring a cosigner (screen them, too) and setting up a payment plan or autopayments. Screen roommates and have everyone sign the lease. You can request deposit money to cover late rents and property damage, as well as proof of income (or how they intend to make payments).
Be sure to:
- Check local regulations for maximum occupancy and other requirements, observe your state laws and follow stipulations of the Fair Housing Act.
- Ask your lawyer to help you craft a strong lease spelling out clear terms on pets, guests, quiet hours and sublets… take nothing for granted. Include consequences for infringements.
- Go over the lease with students and their parents together, if possible.
- Collect parent contact information; students may be a little more mindful if they know you may call their parents with problems.
- Consider requiring tenants to buy renters’ insurance to cover personal losses.
It’s important to conduct move-in inspections with everyone present to document the property’s condition should you need to withhold part or all of the security deposit later. Make sure everyone knows who to call for plumbing emergencies. Develop a webpage with a contact form for routine maintenance requests and a list of basic responsibilities, do’s (clean up trash), don’ts (flush tissues) and a 24/7 emergency number.
You may need to stay close to student tenants with regularly scheduled inspections to make sure little problems don’t become big ones, to answer questions and to develop a good working relationship. If you don’t live close by or you need to delegate, consider hiring a property manager to protect your investment and your reputation with the student community. A little patience goes a long way with student tenants. Ready to take the plunge? Give us a shout! Our property management services can help make renting to students a positive, financially rewarding experience.