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Why Student Rentals Make Good Investment Properties

Student dorm room with large windowFor many rental property owners, every time they think of a college dorm, the image that floats into their mind is a fraternity party. Their thoughts fill with visions of sassy teens and tweenies frolicking in a drug-induced frenzy.

The reality of most people’s college days is far from this picture perpetuated by Hollywood. College students don’t spend half their time partying and destroying the home they live in. Even if some landlords think they do, it is simply not true.

A lot of property investors view student rentals as a no-go area. Among the reasons why they feel this way, the main one is that most college students have never lived on their own before coming to college. Therefore, landlords believe they may have difficulties knowing how to be responsible for a rental apartment. But when they focus on this, investors overlook the fact that these students also have an incentive to be well-behaved. They won’t want to be kicked out of decent accommodation that is near the school.

Moreover, data from the National Center for Education Statistics shows that almost 20 million students will attend colleges and universities across the United States from 2019 onward. This is a considerable slice of the US population, around 6%. Even better, this population is often clustered in one area, which makes targeting them easy. And rental prices in college towns are relatively stable, and demand is consistent. Property investors who ignore this market may be leaving money on the floor.

Every type of tenant has their specific issues which landlords must grapple with. As explains, if a landlord is comfortable with renting to a particular kind of renter, it is only because they have learned to manage those challenges. The same can apply to renting out to college students; landlords can find ways to reduce the risks associated with this demographic. There is a good reason why they should try to; the rewards of renting to college students outweigh the problems by far.

The benefits of student rentals

1. High enrollment equals high demand

University student with backpack holding her booksAcross the US, enrollment in undergraduate and graduate degrees continues to increase. In some places, the need is pushing past existing records, and most universities cannot meet the demand. Increased enrollment means increased demand for student-accommodations. And since most colleges cannot meet that need, off-campus housing will always be in high demand.

2. Rent is stable and higher

Strong demand for student rentals keeps rent prices in college towns stable. This is even when prices are falling in other parts of the housing market. Additionally, landlords can earn more income by renting by the room. Instead of renting a unit to a single tenant for X amount of money, the landlord can rent each room in the unit to different persons and earn more income.

3. Lower rates of delinquency

Woman in yellow sweater paying her rent on her laptopInvestors often imagine that collecting rent from students is going to be a hassle. But the opposite is true; landlords are usually guaranteed their rent because the students’ parents pay for it. Also, students have more motivation to pay the rent than other types of tenants; they are in school for a reason and want to avoid getting kicked out.

4. No risk of 100% loss of income

Because the room often rents the units, it is unlikely that a landlord is going to lose 100% of their income. That’s because the probability of all five students in a unit moving out at once is very slim. The most that can happen is one or two students will carry out, leaving three.

5. Lower costs

Paper and Calculator - budget conceptStudent rentals have lower costs because students have lower expectations of what appliances and amenities they want in the home. Utility bills for the rental are also meager in winter and summer because there is no one in the unit. Yet the tenants keep paying the rent to retain their accommodations. Also, student rentals are usually built of concrete, so there is a lower risk of damage to the property.

6. They require less marketing

There is no need to spend a lot of time or money trying to sell the area to prospective tenants. The location already sells itself due to its proximity to the college and businesses that cater to students.

7. Student rentals are recession-proof

Group of students studying togetherThe trend with college enrollments is that when the economy is down, demand increases. This is because if there are fewer jobs, people become more likely to want to update their qualifications. As a result, when demand for housing is falling in other locations, it is often increasing in college towns.

Finally, for investors who want to avoid dealing with student renters, by all means, there is a way around the issue. One thing college towns don’t lack is property management companies. These companies know how to manage students and can spare wary investors the trouble of dealing directly with students. If you’re looking into hiring a property management company, make sure you employ one that is highly skilled and trusted, like RPM Success.

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