Is Renting to College Students a Good Idea?
Renting to College Students – Good Idea or Not?
Renting to College Students has traditionally been the province of school dormitories and landlords of run-down rental properties. If there was an old clapboard house or beat up 1930’s brick rambler near a school it was certain to be the domain of undergraduates. Many rental property owners conjure up images of the movie “Animal House” with rowdy parties and no regard for proper property maintenance. That’s not how it is anymore.
Times Are Changing For College Students
In the 21st Century, college students are spending a lot more money on tuition and books. That makes focusing on getting their education more important than destroying rental property for many college students. But not always. Kids will be kids and blowing off steam after midterms or finals isn’t unheard of … not by a long shot. What else are the potential pitfalls of renting to college students? At the same time, what are the advantages and, more importantly, how can a rental property owner not just survive, but perhaps even thrive on rental revenues from students?
Not all Students are the same
Freshman college students have some built-in programming that makes their experience with rental property unique. For many students, it is their first time away from home and away from parental supervision; That means no parental brakes are onboard to regulate behavior. No landlord wants to be a babysitter, so it’s important to keep mom and dad in the picture for many reasons. Fortunately, having mom and dad involved helps avoid potential problems for everyone. Not all college students are social miscreants bent on avoiding responsibility. Don’t forget, many college students are mature enough and far enough along in their degree that graduating is the only thing they want to do.
Parents Need to be on the lease
Due to the nature of college students to be less than diligent when it comes to paying rent and preserving property, it’s a good idea to head these two issues off at the pass. Parents need to sign any leases or rental agreements with clear stipulations citing the consequences for unpaid rent or damage to the property. Better yet, have the parents make the rent payment on behalf of their child and avoid overdue or unpaid rent. Some landlords require rental payments to be set up as automatic deductions from a parent’s account taking the student out of the picture. Another benefit of family involvement is financial responsibility for damage to the property. Once again, clear caveats and stipulations in the rental agreement will help protect a landlord’s property and checkbook.
Renting to Older Students and Students with Families
Of course, no only college freshmen rent apartments and houses. Many married students with families need a residence close by the college. Many colleges offer married student housing, but the environment may not appeal to many students or those students may have larger budgets. In any case, renting to a married college student is far less risky than renting to a bunch of teenagers. The same conditions should be considered concerning rental payments and damages. For many college students, parents co-signing lease agreements are not unusual as they may not have established a credit rating that would allow them to sign an agreement individually.
Renting Rooms to Students
One the best things about student rentals is that you can rent out individual rooms to students to increase rent in that property to levels above a standard family living there. . For example, four students paying $500 per month each for a four-bedroom home is better than one family paying $1,000 a month for the same house. In very desirable areas close to campus, you can sometimes put more than one student in each room, further increasing your rental income.
5 Benefits of Renting to College Students
There are benefits for renting to college students that make the opportunity worth considering:
1) Good rental income – Due to the proximity of many college student rental properties to the campus, landlords can receive better rent per square foot of space. In addition to increased rental amounts is the benefit of multiple renters in one property. Also due to the age of typical college students, most parents will sign the lease so payment is all but guaranteed.
2) High Occupancy – Colleges and universities operate on set schedules with published calendars. Students know when to arrive at school and when to leave. Landlords also know the schedule and can count on when students will be looking for a residence. That facilitates maintaining and financing a rental property. As occupancy is less of an issue, rental property owners can experience faster equity gains on financed properties. Equity can be used to acquire and finance more rental property.
3) School Support – Most colleges and universities work with rental property owners to ensure living conditions are acceptable as well as to ensure students respect and abide by all off-campus rules and guidelines. Colleges advertise available rental properties for students and often maintain a referral service. Just as importantly, schools keep records on student performance and can notify a landlord if a student is failing or leaving school.
4) Foreign Students – Before a student from a foreign country can get a visa to enter the United States and attend a college or university, they have to demonstrate the ability to pay for all their housing, food, clothing, and other expenses. This is normally done by showing evidence of money on deposit in a bank in the United States to pay for the student’s expenses. This makes foreign students particularly attractive to many rental property owners.
5) Long Term Value – While many real estate investments can be a gamble, renting property to students is much less so the demand for student housing is always high due to population growth. Some rental property owners have concerns about the number of students opting for non-traditional online educations that don’t require relocating to a new city. Research shows many college educations require students to attend classes and labs on campus and so the long term prospect of continuing occupancy has not decreased at all.
5 Negatives of Renting to College Students
There are potential problems when renting to college students, just as there are for any group of renters. As mentioned above, the downside includes issues of non-payment and property damage. Other concerns should be considered before renting to college students, such as:
1) Neighborhood Culture – The location of the rental property and the cultural atmosphere of the neighborhood are important factors. Neighborhoods located near colleges and universities are more acclimated toward students and student lifestyles. That makes the neighbors more adapted to seeing people walking through the area with backpacks or riding bicycles along the sidewalks. More importantly, are issues of noise and inconvenience. Neighbors don’t like calling the police to silence loud parties and they don’t like strange cars parked all over the place.
2) Disrespect of Property – Because they don’t own the property they live in many students don’t respect the property. That means issues of repair and maintenance could be higher than normal. Lack of understanding about how furnaces, water heaters, dishwashers, and other appliances can lead to much higher expenses. Damages to exterior areas is as much a concern as damage to interior walls, doors, and windows.
3) Late or Unpaid Rental Payments – College students sometimes have difficulty living within their budget. Decisions to pay the rent or pay for some other expense can often hinge on less-than-capable decision making. Spent rent is hard to collect and so it’s always best to have back up in the form of parents that will make the rent payment. As students progress through each semester, funds can dry up and students can attempt to skip out on debts before heading out for Christmas, Spring, or summer breaks.
4) Non-paying Renters – Friends and schoolmates may occasionally need a place to stay and rental properties occupied by students are frequent targets. Sleeping on a couch or having a girlfriend/boyfriend move-in isn’t unusual. Property owners must be diligent in policing their properties to ensure compliance with rental agreements and that includes guests. Terms and conditions in the rental agreement should clearly spell out what will be done when guests arrive.
5) Non-student Renters – Students come and go for a variety of reasons but it’s important to not bring non-students into the mix. Non-students tend to have jobs with regular working hours and students aren’t always the best keepers of the peace when working folks need to sleep. To help reduce costs, students will often include a renter who isn’t a student rather than make the rent payment more for themselves. Many colleges and universities have strict rules concerning non-students in what is considered student housing.
Good Marketing = Good Renters
Finding the right college student to rent can be accomplished by using existing resources. Most schools have student referral services for rentals. There are also online resources like local rental agencies that can list a property. Property owners need to be specific when searching for renters but they can’t violate local or federal housing guidelines. Given all the requirements and standards that must be followed, there is still plenty of information for landlords to consider before agreeing to sign a lease. By marketing the rental property the right way, a landlord can save a lot of time, money, and frustration dealing with untenable renters.
Go Online, Be Online, and Stay Online
College students are tech-savvy people and they prefer their world to be an online world. Rental applications, background checks, and other pre-rental activities can take place online with the results communicated by email. Although this makes the process of renting much less personal, it’s a good idea to start with as it does not commit the property owner’s time or attention until it is necessary. Organizing, informing, and communicating with tenants can be accomplished more easily and readily via the internet. Receiving payments electronically speeds things up over waiting for a check to arrive in the mail. Using technology will help in many ways but landlords should still conduct property inspections to keep tenants on the up-and-up.
Screening Applicants for College Rentals
Nothing matters like screening applicants to determine suitability and ability to be a good tenant. References should be checked and even a criminal background check is a good idea. Of course, these activities take time and money but the time and money spent determining a renter’s suitability may well save time and money later in greater amounts. Property owners should require proof of income or proof of funds to pay rent. A pay stub from an employer or current bank statement can help answer any questions. Checking with prior landlords is an excellent way to determine a renter’s suitability if they have rented before.
Co-signers Are Good Insurance
Whenever possible, it’s important to get a co-signer for a student rental. Most students don’t have a credit rating or, if they have one, it isn’t very good. Requiring a co-signer helps lay off the risk of having the student default on the rental payments. Most students without a credit rating will have their parents sign on the rental agreement and guarantee payment of the rent and other expenses. Once again, it is important to go through the same qualification process as with the renter. By screening the co-signer, a landlord can avoid interruptions in cash flow and ensure a better experience with the renter.
Communicate Clearly and Often
By communicating with a renter, a property owner can gauge more accurately what’s going on with their property. The first step toward meaningful communication is the lease or rental agreement itself. The terms and conditions contained in the agreement must be completely understood by the renter. Spending time reviewing the document together can help avoid future problems as well as clear up any misunderstandings that may be present. Too much contact can be considered harassment, but carefully conducted property inspections along with carefully considered questions can help keep the rental property in great condition and the rental property owner well-informed about the renter.
Property Managers Have Their Place
Many rental property owners work with a property management company to handle one or more rental properties. Having a go-between can be helpful in many areas of rental property ownership. Professional property management companies can handle all the screening and application process so that property owners don’t have to spend time on administrative functions. Property Managers can also help with marketing the property correctly as well as ensuring compliance with local and federal laws. As a landlord, it’s often advantageous to have a “non-owner” collecting rents and enforcing agreement terms. It takes the personalities out of the equation and keeps everything on a business-like basis. If there are problems or issues, it’s often better to have the property management firm deal with the conflicts rather than have the property owner dealing with the financial, emotional, and operational fallout.
Renting to College Students is a Good Idea – With the Right Safeguards in Place
As with any financial situation, it’s always best to take into account as many possible advantages and disadvantages as can be discovered before deciding on getting into rentals for college students. The benefits are definitely there and so are the negatives. A conscientious property owner will avail themselves of all the prudent safeguards they can assemble to avoid problems associated with the rental. Renting to students can be challenging but it is also rewarding, both financially and operationally. Investment in rental property is a science and renting to students is a clear sub-discipline within that science. Despite the potential pitfalls and problems, there is much to gain by focusing attention and resources on this part of society that will always need a place to live while they learn. That’s called income security and that’s what renting to college students is all about.