Many landlords are hesitant to rent to college students. When I was recently looking for a multi-unit property to buy as a partnership with another investor, he made it very clear that he wasn't interested in a property that would have students as tenants.
When I asked why, he gave me a list of the common college student myths. They don't pay rent on time. They have loud parties and destroy things. You'll have vacancies and evictions to deal with.
While some college students may turn out to be bad tenants, many new real estate investors are surprised at the benefits of renting to college students. There are some drawbacks to be aware of as well, but consider both sides before you make your decision.
Advantages of renting to college students
There are certainly some good reasons you might want to rent one of your investment properties -- or even a room in your home -- to college students. Just to name a few:
Lots of demand
Being near a college or university is a built-in source of demand. On-campus housing in many places is significantly more expensive than the average rent at off-campus options in college towns, and many students want the freedom that comes with living in an apartment or house not affiliated with their school. (Tip from my property manager: If you own a property near a college, try to time it so that your leases start and end during the summer months to maximize demand.)
As an owner of several rental properties occupied by college students, I can tell you firsthand that they tend to complain much less than the average tenant. College students are more inclined to just deal with certain minor issues on their own (or not at all). Students are also less concerned with having modern appliances and fixtures, valuing freedom and the location of their student housing above all else.
In many cases, college students' rent is paid by their parents, who are also often willing to co-sign the lease. The average parent expects to pay more than 60% of their kids' total college costs, according to Fidelity, so renting housing to college students can be more financially stable than you think.
Roommates can reduce your risk
Many college renters live with roommates, which can help stabilize the financial situation even further. For example, if you have three college students occupying a three-bedroom housing unit and one roommate can't pay rent one month, there are still the other two.
Potential drawbacks of renting to college students
On the other hand, renting to college students isn't right for all landlords. Here are a few of the potential drawbacks you should consider:
I'm always cautious about renting to a college student when the property is a house located in a neighborhood of mostly families or older professionals or an apartment connected to other units. The simple reality is that many college students keep later hours and are more "socially inclined" than the average middle-aged couple or family of four. At a minimum, you should be perfectly clear about your expectations when it comes to noise, including putting it in writing in the lease.
More damage and maintenance issues
Not all college students are going to damage your property. I have several college students living in my rental properties, and most of them are very respectful of the property. However, it's more common to deal with damage issues from college students. Since it's often their first time with a place of their own, many simply don't realize they need to report small problems before they become major issues. I recently had a tenant who is in college have a leak in their shower faucet that they didn't think to report -- and then I got a $700 water bill.
College students are far more likely to live in a particular place for a year and then move on. Assuming a student lives on campus freshman year, the best-case scenario is typically a three-year tenant. While some students will end up renewing their leases, it's a safe assumption that your college rentals will turn over tenants more often than your non-college rentals.
The Millionacres bottom line
Before you consider an investment property located near a major college or university, it's important to consider the advantages and drawbacks of renting an apartment or house to students. If you decide you don't want to accept student renters, it could be a better idea to look in a market farther from the school, as students will make up a large portion of your prospective tenant base.
Renting to college students can be a profitable strategy, but like any investment decision, it has its pros and cons. As long as you can deal with the potential drawbacks, renting to college students can be a smart part of your real estate investment strategy.