Investing in Real Estate: College Communities

Written by Posted On Tuesday, 15 December 2015 11:34

College communities are a gold mine for lucrative real estate investments. High, consistent demand combined with rent parameter flexibility can mean huge profits for the strategic investor. The student population in the United States continues to swell, and the opportunity to profit from the college industry is becoming more appealing to aging populations looking to find a stable investment.

1. A Surplus of Prospective Tenants

College communities offer a surplus of prospective tenants. Student housing is notoriously limited, with dorms and other on-campus options filled to the brim and a surplus of students looking for off-campus housing. This shortage of college-provided housing is only projected to get worse as the number of students in universities across the nation rises; in 2020, the student population is expected to balloon to 23 million.

Attracting tenants is an easy task in these communities and renters need not spend a fortune marketing the house, as the area sells itself. College towns are rife with concerts, performances, restaurants, and public transportation, making the location desirable to more than just students. A large number of retirees are moving to college towns for a variety of reasons. The National Association of Realtors has reported that baby boomers are electing to move to college and university communities for housing post retirement and some of this influx has been attributed to the benefits of cultural events.

2. Rent Flexibility

Demand is constantly on the rise allowing flexibility in rent parameters. From students to professors, competitive prices are both accepted and expected. The high demand in college towns translates into high rent rates, and a willingness of prospective tenants to match competitive prices.

The profits of renting out a home in a college area can’t be understated. In fact, as the steadily increasing demand for college housing goes up, the purchase price of houses is still surprisingly affordable, making this one investment with a surplus of positives. As many students must live with roommates to be able to afford off-campus housing, landlords can often fill houses with multiple tenants and rent the place per room, which translates to higher overall rental income.

3. A Stable Investment

A real estate investment in college areas is often stable even in times of financial and economic turmoil. In fact, during economic downturns, colleges see an upsurge of enrollment rates, meaning the collegiate industry is one of the steadiest. While landlords face quite a bit of turnover with college students, there’s a stability in knowing a new tenant will arrive each fall like clockwork. If you are looking to avoid this transience-related turnover, consider the bevy of professionals on campus, including school administrators, professors, and other university staff, who tend to be more long-term tenants.

4.   Weigh the Pros and Cons

The benefits of investing in a college town seem to outweigh the negatives, but this investment option isn’t without its provisions.

A Transient Population

The aforementioned tenant turnover can become a negative aspect of renting in a college community if your vacancies are not filled quickly. College students generally change housing each year, and may leave the house vacant during the off-season summer months unless a 12-month lease is in place. High turnover rates can also translate to higher maintenance and upkeep costs in order to return the home to rentable condition for new tenants.

Potential Damages

A combination of immaturity, lack of supervision, and excessive drinking can result in wear and tear on your home. College students tend to be rougher on property, and landlords often must be prepared for further damages than a rental would see in another location with older tenants. The property damage may result in costs beyond those covered in your security deposit.

An Active Investment

Renting out property in a college community means active involvement. Because of the high turnover rates, multiple tenants in one home, and increased potential for damages, your role as landlord will be hands on unless you spend money on a property management company to serve as a liaison.

Investing in real estate in any area comes with its risks, but investing in a college town is rife with expanded benefits. If done correctly, renting out a home near a university can be incredibly lucrative; with an ever refreshing pool of potential tenants, flexible rent parameters, and a stable college industry, choosing to invest money in real estate in a college town just might be the best business decision you ever make. 

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