SS107: Renting to College Students

SS107: Renting to College Students

Welcome to Strategy Saturday; I’m Charles Carillo and today we’re going to be discussing Renting to college students. Approximately 6% of the U.S Population, about 20 million people, attend U.S colleges and universities. In this episode, Charles discusses some of the benefits and potential drawbacks of investing in student housing.

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Transcript:

Charles:
Welcome to Strategy Saturday; I’m Charles Carillo and today we’re going to be discussing Renting to college students.

Charles:
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Charles:
Back in 2006, my first tenants were college students and approximately 6% of the US population, about 20 million people attend US colleges and universities. According to urban.org, 79% of the students attending a two or four year college live off campus. Renting to college students can be a lucrative endeavor, but as there are benefits renting to people in the snitch, there are also drawbacks. So first, what are the benefits of renting to college students? Well, rental demand is a big one. College towns have built in demand only Simple marketing is required. Your marketing budget will be minimal with well located student rentals. Next is higher returns. Typically, student housing has higher returns when compared to to traditional multi-family rentals. Also in most student housing situations, landlords are renting by the bed, not by the unit. This is a much more profitable business plan. Now, similar to Airbnb properties, the landlord is much more hands-on with these tenants. These are a more of an all-inclusive service, not just a typical apartment. Now before we go to the next point, I wanna preface that if your end goal is having an Airbnb rental or renting the college students underwriting the property as a normal apartment building or rental house is the best method, then after you purchase it, your returns will increase after you transition it.

Charles:
This is also much safer. If we go through a deep recession or covid 2.0, travel will slow or stop. And in the example of Covid 2.0 people left their apartments to go home. Yes, most of them probably completed paying their leases since the apartments were in their, were in their parents’ names and they were co-signers. But what happened that summer when school is online in August and as a landlord who ran their numbers as a multi-family rental, you can now rent it as such and cover all of your expenses. Next is lower expectations. Landlords are able to spend less on upgrades and updating since students normally just want a place to live. Student renters have much lower standards, let’s say, than older, more experienced renters. Next is consistency. One reality of renting out residential real estate is tenants not paying rent on time or not at all.

Charles:
One benefit of student rentals is that students usually receive financial assistance from their parents who are also co-signers with much more to lose when compared to a typical C or B class renter. Secondly, there are multiple tenants in one rental. If you rent a three bedroom apartment that is three renters, three rent checks from three sets of parents every month, even if two pay on time and one is later behind, you’ll most likely be able to cover all of your expenses for the month. So what are the risks of renting to college students? Well, number one, as you, I would imagine would be property damage. You know, college rentals often have an increased risk of damage, increased wear and tear noise complaints and a lack of maintenance are normal. With college renters, nex is turnover rate. There’s a high turnover between academic years. It is rare for college renters to rent more than one year at a particular property.

Charles:
Your increased rents should cover the increased costs associated with apartment, make, readys, apartment downtime, leasing costs and management costs. You can also avoid short term leases and have a minimum lease of 12 months. Next is it’s a limited way for screening tenants. You know, college students don’t have much of a track record, so there’s not much to check. And usually this is their first apartment and this is where requiring a co-signer is a must. Next is contract violation. Smoking overcrowding neighbor complaints. Subletting rooms are all normal with student rentals. Having co-signers, having security deposits, having contact with those co-signers or threaten to do so, all help to minimize these issues. So how do you minimize the risks of renting the college students? Number one, require a co-signer. Number two is require a security deposit or move-in fees for shorter rentals require renter’s insurance if something is damaged in their unit, or more importantly, if the tenant or one of their guests is harmed on the property.

Charles:
The renter’s insurance includes personal liability coverage. Next is fully screen all tenants, you know, check your job history, rental history, credit report, income, adverse items, criminal background, sex offender status, prior evictions. Now most tenants, good or bad, that are college students will not, will have come up without anything for any of these points. They might have some, but most of the time they’re gonna come back clear on a lot of these. But it’s still one way of protecting. Cuz if you have something that already has a criminal background or one of these other, something that’s negative on the report it’s something you’re gonna wanna look into further before approving them for the apartment, clearly outline rules and expectations. As I’ve been mentioned before on previous episodes, having a lease cover sheet outlining all of these is a must a spell, especially with college rentals.

Charles:
So how do you track college students to your rentals? Well, if you’re close to campus, distance to campus is by far the most important factor when renting the college students walkability. Many students do not have their own means of transportation. Even if they have a car, they might not be able to park it at their school easily. When I was at college and lived off campus, even though I had a car, I regularly would walk to school since parking was a hassle. Affordability, most students at most universities are not able to afford expensive apartments. Researcher area and run your numbers at which rent for similar college rentals is. And most college rentals are C plus B class. And not too many students will be opting for an A class property. Next is in-house laundry, and this goes hand in hand with the walkability. Many students will not have access to a vehicle and you do not want to have one in each unit that’s purchased.

Charles:
That’s perfectly fine. You know, purchasing one coin operator washer dryer for every two to five units, let’s say, might work fine or they can purchase tokens from you. So there’s no change required. Next is fast free. You wifi, everything for college students is online. They don’t need any cable tv, they just need fast wifi. And that is something else you can include into the price of rent. Some people would include electric into the rent, and it might be required in a rent by bed type situation, but you want to make sure that you’re not losing money. So figure out exactly what an annual bill will be what the maximum would be, and then using that number when including it into people’s rents. Lastly, always advertise your rental online with lots of high quality photos and include the exact distance from your property to the campus of your local college. So what I would do in my listings is it would be something like you know, the distance away from the college. I would also put the college’s name in there or anything else. Let ’em know that the, this house is occupied mostly by college students and that usually is the best way of finding college students and being able to rinse them pretty easily. So I hope you enjoyed. Please remember, rate, review, subscribe. So make comments and potential show topics at globalinvestorspodcast.com. Look forward to two episodes next week. See you then.

Announcer:
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar, LLC, exclusively.

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