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Should You Invest in Rental Properties in a College Town?

Posted by Mike Jordan on July 2, 2018
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When you invest in real estate rental properties there are many considerations you have to take into account. Deciding on the market you invest in is one of the most important. When you select a market, it dictates everything from the demographics you will be renting to as well as rental price, vacancy periods, and more.

As you look at markets, particularly those with high rental demand, it is important to gauge why the rental demand is so high. For example, are the housing prices too high for a moderate income or is there a large turnover in residents due to outside factors such as work limitations or a major college/university?

College Towns—Good for Rentals?

College towns are not like your average market. They are a different beast, altogether. They have a wide range of advantages but an equal line of disadvantages, too; many of which are not present in other markets. When considering purchasing investment property in a college town, it is always important to review the pros and cons of such a market before lying your money down on the line.

College Town Pros

College towns have a unique set of pros that are well worth considering when you are thinking of investing in rental properties. Let’s take a look at the main pros of investing in property in a college town.

-Self-Marketing
One of the greatest things about a college town is you won’t have to spend money marketing for people to move into the area. There is already a reason, a purpose for people to flock to your neighborhood. The college itself will spend a fortune on marketing to non-residents to move to their area, so all you have to do is convince them to rent your particular property. The hard work is already done for you.

College towns also have a big draw for non-college residents, as well. Towns that are centered around a college or university often have a great cultural environment and are brimming with museums, theater and music presentations, sports, and a wide range of nightlife activities, such as concerts, dance halls, and more.

In addition to cultural and entertainment activities, college towns provide a wide array of food, drink, and shopping opportunities. Most college students don’t cook for themselves, so you’ll find an extensive selection of eateries throughout the area, as well as bars, clubs, delis, and bakeries. Public transport is likely to be more available to renters in college towns than elsewhere, too.

-Tenant Availability
When it comes to a potential pool of tenants, you won’t find a bigger one than in a college town. College students won’t be looking to buy a home any time soon, so you know there will be a hefty number of people looking for temporary living arrangements. While some may take up residency in a dorm, you are likely going to be facing a larger selection of students who want to live off-campus—which is good news for property owners nearby.

In addition to a large pool of tenants, you have a stable stream of tenants. Even if your current renters are planning to leave when they graduate, you know there is another class of newbies directly behind them. As long as the college is still accepting students, you will have a constant flow of potential renters. This means you will also experience lower vacancy rates than you would in an area of lower rental demand. Double perk for property owners!

College Town Cons

Of course, every venture has to have some cons and investing in college town real estate is no different. Here is a selection of cons that come along with investing in rental property in a college dominated town.

-Turnover
While you will have a large tenant pool to select from, you will have a higher turnover rate than you would in any other location. The most you can hope for is three to four years for one tenant, but even that period is highly unlikely given that most students split their enrollment time between on-campus housing and off-campus housing. This means the number of full-house cleanings and repairing that you will have to do in-between tenants will be much greater than non-college areas.

-Wear & Tear
Of course, the biggest issues facing landlords of college town properties is extensive wear and tear created by college life. College students are known for not making the best decisions—and let’s face it, they’re also known for disproportionate drinking and excessive partying. This means your property will be facing more wear and tear than the average rental property would strictly from the lifestyle choices of the tenants you are renting to.

If you purchase a property in a college town, be prepared for property damage and account for frequent repairs in your budgeting.

Overall, there is money to be made in investing in college towns. You are likely to find a great property at a great price and you will have no shortage of people to fill it with. Just be aware that you will be facing many repairs, a large turnover, and some really unusual phone calls before you dive into this unique market place.

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