Pros and Cons of Property Investing in College Towns
Investment properties that are located in college towns offer some unique opportunities for investors. The advantages include a large potential tenant market and a fairly stable rental price. The disadvantages include constant tenant turnover and major wear and tear on the property.
4 Pros of Investing in a College Town
College towns can be a great place to buy investment property. There are many positive parts of this type of neighborhood that can allow you to make a profit investing here. Here are four great things about college towns.
- Large Tenant Pool: In a college town, there is a large population of renters. Each semester, new students enter college and need to find a place to call home. If you choose to invest in rental property, a college town can provide you with a large pool of prospective tenants to choose from.
- Stable Rent: The demand for rentals is high in college towns. This demand can help keep rental prices in the area strong even when other parts of the housing market are failing. In addition, off-campus housing is often paid for by the student’s parents, or even by the college itself, so you may be able to get a higher rental price for the property.
- Fewer Vacancies: The high demand for rentals in a college town can also lead to fewer vacancies. There is always the next student or college employee looking for a place to call home.
- The Area Sells Itself: You do not have to spend much time marketing the area because the area sells itself. Attractive amenities draw people to college towns. There are endless activities available in the arts, sporting events, and entertainment. Guest speakers and musical acts are also popular events. College towns are known for having a large number of restaurants and shops. Restaurants are within walking distance and serve various types of food. There are big chain stores as well as local mom and pop shops. Another draw of the college town is that they are pedestrian friendly and offer wonderful public transportation. There are university shuttles, public buses, plentiful taxes and sometimes a railroad system. Shops and restaurants are often within walking distance.
4 Cons of Investing in a College Town
There are negatives to buying investment property in any area and the college town is no exception. Learning about the negatives can help you decide if the negatives are things you can deal with or if they are not the types of issues you are looking to encounter in a property investment.
- Tenant Turnover: While there is a large rental market in a college town, these tenants are often short term. They stay in town while they are attending school or working at the university and then move on. Even if a student will be attending a university for four years, they often split that time between on-campus housing and off-campus housing and typically change housing each year.
- Your tenants will not sign long leases. You will be lucky if you get a student to sign a one-year lease, so you should be ready for high tenant turnover.
- Could Be Hard to Find Tenants in ‘Off-Season’: Since fewer students attend college in the summer, you could be looking at vacancies during the summer months. One way to plan for this is to have all your tenants sign a twelve-month lease instead of a month to month lease or a nine-month school year lease. This way the tenant is responsible for paying you whether or not they will be living there in the summer months.
- College Living Is Hard on Property: College students can be quite destructive when it comes to their living space. Excessive alcohol, immaturity and their parents footing the bill can contribute to this lack of concern for the living space.
- Property damage is very common and is often more than the amount you have collected as a security deposit. Damaged floors, holes in walls and broken cabinets, doors and even windows are not unusual when renting to college students.
- Not a Passive Investment: Finally, it is important to realize that property investing in a college town is not usually a passive investment. This is particularly true if you are renting to college students. There will be high tenant turnover, potential damage to the unit, noise complaints and roommate conflicts which could lead to one or more tenants breaking their lease. You have to determine if being a hands-on property investor is the right fit for you.