As an investor thinking of investing in a rental property in a college town, there are some pros and cons to consider. While a steady stream of interested tenants is largely guaranteed, you will face dealing with inexperienced and first-time renters that may need extra guidance. Understanding all of the angles and being aware of how to mitigate the downsides is key before taking the leap.

If you’re thinking about buying real estate, consider investing in rental property in a college town — they tend to have a stable economy due to the cash influx from the local university. There is usually good public transportation so students without a car can get around, as well as amenities such as restaurants, movie theaters and grocery stores within walking distance. It’s no wonder these properties almost sell themselves.

Upsides of Investing in a College Town

Replenishing New Tenant Pool

With a steady stream of students going off to school every year, you’ll have a large pool of potential tenants to choose from. There will be no shortage of people looking for a place to rent.

Unlike a standard rental, on-campus housing can be expensive, crowded, and noisy. There are rules regulating things like whether students can invite people over. Plus, students might end up living with a noisy roommate that they were not able to choose. As they get through their later college years, many people look for off-campus housing.

Reliable Income Sources

Students have family members paying for them to attend university, which might also cover their rent. Adults with an established rental history and steady stream of income are more reliable than teenagers juggling classes and working part-time jobs. See if you can find a tenant whose parents or other family members are paying their rent. Some also receive financial aid to cover their expenses. This helps assure you no matter what happens; you’ll get your money on time each month.

You aren’t limited just to students when looking for a new tenant. College towns are home to a bustling staff of people supporting the university. Professors, custodians and other faculty can also be potential renters.

Thriving Community and Neighborhoods

Properties in college towns tend to appreciate in value over time. That is, of course, a benefit to you because you might be able to set higher rent prices or sell the property for more than you paid. And — because rental rates are steady due to increased demand — you can make your prices at market value rather than lowering them in an attempt to draw in tenants.

Some houses are a hard sell because they’re far from conveniences like a hospital, shopping centers or entertainment. This usually isn’t a problem in college towns. City planners often build amenities around the school, with housing, sports stadiums, gyms and food trucks peppered throughout the campus and surrounding areas.

Even free events pop up around universities, like guest speakers, live music, outdoor theater and workshops free for students to attend. With this in mind, look for houses near the school — which is often the central hub of the town.

Your renters might live within walking distance of everything they need, helping them save money on gas. University towns often have abundant public transportation, especially in larger cities. Whether people want to take a bus, subway or even a train, there’s almost always a way to get there.

Big cities are also known for having bike lanes and pedestrian-friendly areas near the school. Some students might not own a car yet, so be sure to look for houses in a neighborhood where it would be safe to ride a bicycle. This can be a massive draw to anyone looking to save money while paying for classes and textbooks.

Downsides of Investing in a College Town

It’s also important to consider the drawbacks before investing in rental property in a college town.

In the summer, your tenants might leave. Many students want to stay with their families for a few months to save money. Others take advantage of seasonal summer jobs worldwide as a way of traveling on the cheap. These positions advertise heavily to college students and can be appealing after two long semesters. Many simply take a break from being on campus from May to August.

Shorter Lease Terms are Often Requested

In other words, you’ll likely have a high turnover rate with your renters, especially if you rent to a college senior on the verge of graduation. It’s rare to find a student who lives in one place throughout their entire college career and even rarer to find one who stays in town after finishing school.

You can mitigate the risk of having a vacant property for three months of the year by turning it into a short-term rental, and advertising to vacationers who want to stay somewhere new for the summer or even a few days. This works especially well if the college town has other things people want to see and do, such as a theme park, nearby nature preserve or famous landmark.

You could also create a one-year lease for all your renters, even if they know they’ll be away for the summer. This could put many students off, but remember, you’ll likely have a vast pool of applicants. Your tenants will simply pay for the months they’re gone and you can use this time to do any needed maintenance or repairs on the property that would typically inconvenience the occupants.

If there’s an extensive renovation you’ve been putting off — like ripping out the carpets or repainting every room — summer is the time to do it. You can also use chemicals you couldn’t use while your tenant was home, saving you the cost of paying for your tenant to stay in a hotel.

Risk of Property Damage Due to New Renters

It’s also important to consider property damage. No landlord wants to imagine their house being trashed by careless merrymakers, but it’s practically inevitable when renting to college students. Drugs and alcohol can turn a pristine apartment into a hovel in the blink of an eye.

Be prepared for a hands-on rental that will require more maintenance than you might be used to and repairs that could cut into your budget. What if your tenant secretly brings home a dog and leaves it to its own devices while attending class? What if they have a dispute with their roommate?

You need to decide if you’ll manage the property on your own. It could make sense to hire someone to take care of certain issues rather than dragging yourself, bleary-eyed, to the place at 3:00 a.m. to settle a petty argument. Consider ensuring your tenants have a way to easily submit non-emergent complaints, such as a tenant portal or other means of communication.

Remember, though, that you’ll deal with problems from time to time with any renters, not only college students. The issues that crop up are inevitable and can be mitigated with good practices like tenant screening and tenant education. If you’re set on being a landlord, you know this and likely already have measures in place.

Larger Up-Front Investment

Properties in a college town will likely be more expensive than those in an area without a university. However, this is usually offset by higher rental prices in the region. Look at how much people typically charge for rent before you buy a property and then calculate how long it will take to turn a profit.

Other Considerations

Before buying any property, there are a few things you need to look into. For example:

  • Does the house need any repairs? Will they be minor or extensive?
  • Will you allow pets? How about smoking?
  • How will you handle maintenance issues?
  • Are there any environmental hazards or problems like insect infestations?
  • Is there a homeowner’s association? What kind of regulations do they set?
  • How long do you plan to rent out the property?
  • What do previous tenants and owners say about the house?

There are many things to consider before investing in rental property in a college town. Create a list of any questions or concerns you might have before taking the leap and buying real estate.

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