As a real estate investor, landlord, or homeowner with rental properties housing college tenants back-to-school-time can be daunting. College students are known to have parties, be irresponsible, and produce higher maintenance and repair bills. College rental real estate has risks and benefits but additional steps must be taken to minimize the risks. You may be renewing a lease, starting a new lease, or considering selling your property to avoid the stress. If growing weary, don’t sell and reconsider that the benefits of renting to college students outweigh the risks. College rental properties can yield 30-40 percent higher rent than similar properties in the same city that are not close to a college campus. The rent you are able to collect from a rental property can be a 40-60 percent markup of the mortgage payment!
The demand is high and the supply is low. College students want to be close to campus so they are willing to pay more. The rental housing market in close proximity to a university or college campus yields higher profits for the homeowner due to rent being higher. The benefits of renting to college students outweigh the risks if a different approach to renting is taken.
6 Things You Can Do To Reduce Risks
1. Write A Specialized Lease- A lease for college tenants should be more specialized than a lease for general renters. A college-tenant lease may be a shorter-term lease for just the semester or the academic year. Special lease clauses should be added that focus on noise levels, parking, parties, damages, or other college tenant risks. Before signing the lease have a screening and application process. Ask the tenants in the application about their criminal records and require their parents to be co-signers.
2. List Individuals On The Lease- Make sure that each roommate is listed by their individual name on the lease in order to ensure accountability. In case roommates are no longer getting along or someone decides they would like to leave school to pursue an internship each individual can be held responsible for their lease agreement. This will minimize turnover and subleasing worries. What is the maximum occupancy of the property? How many people can occupy one bedroom? Can the boyfriend/girlfriend live there too? These are some questions to ask yourself and address in the lease by renting to individuals or by the bedroom.
3. Openly Communicate- Create a professional working relationship. Ask if there are any problems and keep the lines of communication open to reduce the escalation of problems. Schedule walk-throughs to monitor the property with one of the residents. Mention this in the lease and periodically survey the home for property damage and lack of maintenance to the home. Doing this will help keep problems under control and may encourage the tenants to take better care if they expect you to visit the property.
4. Don’t Pay The Bills- Maybe you are considering the rent to be all-inclusive with all bills paid. Instead of including the bills with the rent, require the tenants to pay the utilities, water, Wi-Fi, and cable. Some students are used to being taken care of and may take advantage of the utilities and water usage if they don’t directly deal with the cost. You also may not select the preferred internet speed and cable channels, so give the tenants the responsibility of paying the bills. Have the tenants sign- up for and pay the bills so that they can partially understand the expenses and cost of maintaining a property. As a landlord you should take care of the yard work because landscaping may be tougher to maintain.
5. Hire A Property Manager- A property manager can oversee the property and handle the situations you are too busy to deal with. Students may be hard on the property so your property manager can be the contact person for both you and the tenant. The property manager can keep a close eye for you on the property, schedule the lawn service, and deal with maintenance issues.
6. Require Renter’s Insurance- As a landlord you will have insurance on the property but require your tenants to cover their possessions with renter’s insurance. Renter’s insurance is inexpensive and can be between $9-$15 per month for $30,000 of property coverage and $100,000 of liability coverage. Have your renter submit their proof of insurance with each lease.
Many students receive a lump sum of money at the beginning of the semester whether it is scholarships, rent from their parents, or federal financial aid refund checks. Instead of collecting money monthly, they may want to pay for the entire semester in advance. Encourage your tenants to pay when the semester begins so that you don’t have to worry about late rent or students running out of money at the end of the semester.
Welcome in the college students and the profits of rental properties near colleges but be sure to reduce the risks. In areas near universities you can also consider renting to non-traditional college students, graduate students, professors, and faculty members who will also need housing near campus and these tenants may come with fewer risks. As an investor or landlord, great profits can be made if the proper steps are taken to minimize the risks and increase your return on investment.