If you own or are considering investing in property near a college or university, then renting it out should be with the implicit understanding that your primary demographic will be students. Depending on your personal experience, your rental, and other factors such as where you are in the United States, that phrase may be met with dismay, or simply acceptance that you have to tailor your rental towards a different type of tenant. In either case, it is important to decide in advance if it will be worth your time and investment to rent the property or properties out to students in the area. This article will help you figure out how to make those calculations based on the information available to you.
Considerations When Renting to Students
The first and most important consideration is that students are not permanent or even long-term tenants. Most will move in out and out quickly, although some will remain for the entire duration of their study if you are luck. The second is that students bring along a higher risk than most other types of tenants, which means that you have to either have insurance to offset risks, or should charge slightly higher rates to do the same. Students are often on their own for the first time, which means that you can face issues with poor money management, noise and vandalism, and immature behavior. Students also often fail to take care of their apartment due to the short term nature of their stay. While these risks are definitely considerable, there are many ways to combat them, which can make your rental profitable.
Pros of Renting to Students
- Student campuses like Bellevue University often allow nearby properties to advertise rentals on campus
- Parents often pay rent, which means you will likely have fewer risks than calculated
- Students often pay for a whole semester in advance
- Student renters typically have lower expectations than non-students, and won’t mind fewer amenities or older appliances, so long as the rent makes up for it.
- Many students share rentals to reduce costs, which means that you can charge slightly more in rent for a roommate arrangement.
Deciding if a Student Rental Is Profitable
Taking the time to calculate your potential earnings and then to create a risk analysis for your property can help you to come to a logical decision.
Rent Rate – How much are similar properties renting for? How many students are typically in them? What is the average rate per bed for a local dormitory? How does your property compare in amenities, including distance to the campus, to those properties?
Vacancy – Most campuses are empty during summer months, which often means that your rentals will also be empty. In some cases, campuses hold summer classes, and you can rent the property out to summer students, but this often will not be the case. However, you can use this time to refurbish, repair, and inspect property before marketing it to new students in the fall.
Risks – If your property is located next to a university known as a party school, then you will obviously have more problems then if you’re located next to a university known for quiet, scholarly students. Getting in touch with a local real estate association and asking questions about regular damage to student housing in the area can also be a great idea.
Rental Type – If you’re renting out a home, you can often choose to rent it per bedroom (if it isn’t in a single family zone), which allows you to earn more on the rent than if you lease out the home as a whole. Breaking down spaces into as many bedroom areas as possible, even refurbishing areas into small apartments, can drastically increase your rent expectancy.
Damages – Most student caused damage falls under their liability and they will have to pay for repairs. By creating a lease that requires parents to co-sign, and agree to pay for any damage, you can mitigate costly issues as much as possible.
Typically, you should aim to set aside at least 30% of your earnings after tax to put into repairs, maintenance, and other issues. And, if your numbers add up, and the lease will remain profitable after accounting for that, potential damage, and empty months, then you can definitely rent to students.
Student rentals are riskier than renting to adults with experience with rentals, so it is almost always a good idea to attempt to mitigate those risks.
- Create Rules – Create rules in the lease contract that ban dangerous activities, fireworks, fires, etc.
- Stipulate that the student pays the utilities, and reduce the rent to account for it. Students are well known for running heating/AC nonstop, forgetting to turn off the lights, etc. And by ensuring that they pay for it, you reduce your own costs.
- Screen the student and their parents. Make sure that you call their previous dormitory or living accomodation if applicable to ensure that they were not kicked out.
- Rent by the bed so that if one student fails to pay the rent, the rest are still paying.
- Manage and regularly pay attention to student housing to ensure that the rules are being followed, and the property remains in good condition.
Renting to students can be very profitable if you are in an area where rental rates are higher, students are relatively circumspect, and there is a high demand for student housing. However, it does require more time to manage, due to the higher necessity of background checks, regular inspections, and regular tenant management.
If you need help marketing, managing, or renting student housing in Bellevue, contact SJA Property Management for a free consultation, and more information.