If you are thinking about investing in a rental property located near campus or university town, then you would likely be catering to student renters. But like any other investment, renting to college students has its pros and cons.
Pros of renting to college students
Stable demand for rentals. Finding a tenant will be easy for you if you own a property near a university or college. As long as these schools accept students, you should be fine. Also, not too many schools offer a full four-year housing, and many would want more privacy that dorms can provide.
Higher yield on rents. Most of the time, you would have multiple tenants living in your apartment and splitting the rent. With that kind of arrangement, you can increase your rent price and keep the apartment affordable for the tenants at the same time.
Peace of mind with a cosigner. Most of the time, parents will cover the rent and living expenses. By accepting a cosigner, your rental income is protected. Sometimes, parents would prefer to pay in advance, so collecting rent would no longer be a concern.
Low expectations. Students would not be looking for apartments with high-end amenities; this would be least of their concerns. You don't need to worry about upgrading your residence with modern appliances, and that means savings on time and money on your part.
Risks of renting to college students
Lack of maturity in maintaining a property. It is likely that these students are renting for the first time and are inexperienced in managing a property. Don't be surprised if you will discover at the end of the lease unreported maintenance issues such as a leaky roof, or find significant damage to your property due to negligence.
To protect yourself from such a potential headache, you can ask for a security deposit and add a clause on your lease requiring your renters to report any damage immediately. It is also wise as well that a routine inspection of the property to be conducted every four to six months.
No credit or rental history. It may be difficult for you to evaluate your applicant since most will have no rental or employment experience, or credit history. You may opt to have a cosigner instead, so someone would be financially responsible for covering for the rent and/or cost of damage.
Lack of experience in paying rent. Students tend to be quite irresponsible when it comes to money due to their lack of experience. You might experience delayed or incomplete payments because of this. You can add a clause making all parties jointly and severally liable for fully paying the rent. You can also implement ways to send reminders and enforce reasonable late rent fees.
High Turnover Rate. A high turnover rate in the student housing market is reasonable. Often, students will sign short-term leases rather than leases longer than one year. While there is not much that you can do as a landlord, you can offer short-term or discounted summer leases to ensure vacancies are filled even after the academic year ends.
Read next: What Is a Homestyle Loan and Can It Be Used for Renovations?
