Pros And Cons Of Student Housing Rentals
There will always be ups and downs to every property investment. Stay long enough in the real estate business and you’ll see that there are many different ways to build a portfolio. One area of the rental market that has seen tremendous growth in recent years has been the student housing rentals. Many colleges cannot handle the overflow of students, which makes this a big opportunity for investors.
The advantages can include a large tenant market and a stable rental price. The downsides can be high tenant turnover and a lot of wear and tear on the property. This makes student housing a bit of a goldmine and a headache depending on how you handle it. Here are some pros and cons to consider, before deciding if student housing is right for you.
PROS:
- Higher Cash Flow. What makes student housing so attractive is the dramatic increase in rents received. Because there is always such high demand for student housing near colleges and universities, higher cash flow can be created. A high demand allows you to practically set your own prices.
- Condition. Student housing does not have to be top-class to sell. That’s not to say you can get away without any maintenance but it won’t need a complete overhaul every year. Unlike most rental properties, student housings are not judged solely on their condition. This makes investments relatively low compared with other types of rentals.
- High Demand. You will have no trouble finding tenants for student housing. The closer it is to the campus, the more tenants that will come to you. This way you know your target market each year which helps you focus on marketing and bringing the right people in. You can also make use of your existing tenants to find the next tenant.
CONS:
- Property Condition. Dealing with tenants aged 19-22 can be as you would expect. While the initial investment in the property may not be much at first, you will want to have money set aside for maintenance every few months. Student tenants will rarely treat the property like their own. Walls will get dirty, furniture will get damaged and the occasional toilet will get clogged. You need to be sure you can stay on top of maintenance throughout the year.
- Town Regulations. When renting out student housing you need to follow strict rules and guidelines. For most towns, you need to submit an application before you can rent a property to the students. The town council will measure windows, check fire alarms and inspect the overall safety of the property, before signing it off. Once approved you’ll need to pay an annual fee each year to keep your license. The cost of this license can make many investors think twice about student housing, so do your research.
- Noise Levels. If there is non-student housing around the property, you can expect noise complaints from time to time. When students first sign the lease, they may tell you they are more focused on their studies and not interested in partying but all it takes is one party to change that. Too much noise can make neighbors call the police and if there are too many problems, you will have a hard time getting your student housing license renewed.
Student housing will not be for everyone. You need to carefully weigh the pros and cons before deciding, if this is an investment that’s right for you. If the location is good and you can stay on top of management, then student housing can be a veritable goldmine.