1ca2144072994fb2a1fa6c973a122075.jpg

The Good and Bad of Owning A College Town Property

College towns create a unique opportunity for property owners and investors. Similar to any other market, owning property in a college town has its pros and cons. But if an owner can take advantage of the pros and mitigate the cons, a college town property has potential to be one of his/her best-performing assets. Listed below are a few of the positives and negatives of a college town real estate market.

Pros

Large Pool of Tenants:
In our previous blog post, we highlighted a study that examined 21 cities where renters outnumber homeowners. Many of the cities mentioned in the study are homes of major universities with a large population of students in need of housing, consequently creating a consistent flow of current and prospective tenants.

Low Vacancy:
While they are not a guaranteed cause and effect, there is a definite correlation between large pools of potential tenants and low vacancy rates. Each semester, a college town experiences an influx of new students and employees who replace the seniors, graduates, and transfer students on their way out. That said, in most cases, the only reason a property would have high vacancy rates is poor management, or a bad reputation throughout campus and the community.

Stable Rent:
With the demand for rentals being so high in college towns, rent rates remain relatively stable. In addition, many students get their rent paid for by their guardians, so there may be many opportunities for higher rent prices.

Market:
When you own property in a college town the area sells itself. The university and the activities it offers attracts people from all over the country. Whether it’s athletic events such as football or basketball, culture or entertainment like art exhibits or concerts, or renowned food and shopping destinations, each college town offers a unique environment that cannot be experienced anywhere else.  Cons The pros of owning property in a college town are certainly enticing, but it’s important to consider the cons as well, as they can make even the best owners regret their investments.

Tenant Turnover:
We’ve established the excellent potential a college town’s large renter’s market offers. The problemis not finding potential customers, it’s retaining tenants for an extended period of time. Best case scenario, a property retains a student tenant for their entire college career, which averages four to five years. This is a rare situation, and with many students moving multiple times during college, it’s hard to get them to extend their lease, especially when it’s for a two-year period.

Wear and Tear:
Maintenance expenses are notoriously high for college town properties. There multiple factors that contribute to high amounts of damage college student inflict upon their living space. The combination of immaturity and high alcohol consumption by student tenants often leads to a lack of respect for their living space. Furthermore, when a student’s rent is paid for by their parents, it can sometimes remove the tenant’s sense of accountability. A thorough screening process can help minimize repair costs and the number of destructive renters a property endures, but every once and awhile a bad tenant manages to slip by.

Off-Season:
During the summer, universities experience a significant drop in student population. Some students head home for a few months while others go on vacation before the upcoming semester. Either way, without the right countermeasures, property occupancy rates are very vulnerable during the summer-time. The best way to counteract a big drop in student population is to have tenants sign a minimum of a twelve-month lease. With tenants signing on for an entire year, they are on the hook to pay for the summer months, even if they don’t intend on occupying the living space during that time frame.  There’s a lot of upside in owning property in a college town, but it’s very dependent on the market, and the owner or investor. Managing some of these pros and cons can be a dangerous game to play, but if you succeed, the risk will be well worth the expended time, money, and effort.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *