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5 Pros & Cons Of Buying Investment Properties In College Towns

Here are five reasons for and against investing in college town.

By Team Agorafy September 5, 2016
Credit: Nagel Photography / Shutterstock.com

If you’ve seen the movie Neighbors with Seth Rogan and Zac Efron, the thought of owning a rental property in a college town could bring on the kind of nausea you haven’t experience since the morning after graduation.  Visions of wild frat parties, drinking and parental lawsuits could scare any potential landlords back into a full time job. Surely, there are some pluses as well? Here are five reasons for and against investing in college town.

Related: Affordable Housing For Grads? There May Be Hope. Entry-Level Digs in the Big City

PROS

1. Top Universities Aren’t Going Anywhere.

People will always covet a degree from a good university and so there will be a built tenant pool. Also the neighborhoods around them tend to be fairly stable. It’s not like the local Walmart or Steel Mill suddenly shut down. College towns have built in amenities—entertainment, groceries stores and transportation that keep the local economy thriving.

2. Parents Can Cover The Rent

After actually getting in to decent university, the last thing any parent wants is for their child to then get kicked out because they couldn’t come up with the rent to stay in town. Often parents will sign “Parental Guarantee” on a lease ensuring that the rent will be on time even if their kid’s homework isn’t.

3. High Rents

Usually student housing rents by the bedroom. This allows for far higher rents than if one tenant was renting the whole apartment. The closer to the university, naturally the higher the rents.

4. Savvy Parents Can Have Their Kids’ Room Mates Help Pay For College

A parent who owns a rental property where their son or daughter attends college can double dip. Firstly, they can provide a place for their child to stay and secondly they can charge their college pals rent. If they already own the property outright that rent can go straight towards paying fees. Also, if their child is responsible, they have a built in property manager who is getting a crash course in being a grown up.

5. Screening With Parents Adds A Layer of Responsibility

Often a parent will look over a property with their child and the property manager or landlord can take that opportunity to build a rapport and get a direct contact number mom and dad. That adds a level responsibility to the tenant. Even in their most debauched state, they will always be aware that the landlord can always call their parents if they mess up too badly.

CONS

1. College Kids Gone Wild

Let me once again refer you to “Neighbors”. Drugs, drink sex, toga parties and food fights. Need I go on? Ok – property damage, calls from the cops and late rent. ‘Nuff said.

2. High Turnover

Assuming you have purple patch and get some good tenants. In a few years those tenants will be gone and another batch will be in. They might not prove as respectful of your rental property as the ones that just left.

3. Tough To Find Tenants All Year Round

The best time to rent a college apartment is before the start of the Fall term—usually in July and early August. If you miss those months you may find yourself vacant for almost a year.

4. Big Headache

A word of advice if you’re buying a college town investment property—get a property manager or prepare to shave a few years off your life. College kids trampling all over your property, means excessive wear and tear. Your house may look like a bomb shelter by the time they move out and the security deposit may not cover your losses. Also, don’t expect every tenant to be honest just because they’re getting a degree.

5. Your House Could Turn Into A Commune

If you have five different students renting one apartment, paying room by room you’ll normally find there are one or two responsible tenants. But, some of the flakey tenants may either decide to stop paying altogether, thinking their roommates will cover for them or they may just decide to move out and stay with a boyfriend/girlfriend. The worst case scenario the boyfriend/girlfriend (who is not on the lease) moves in and the good tenants decide to move out. Good luck enforcing the lease through all those shenanigans.

Team Agorafy

ABOUT THE AUTHOR Team Agorafy

ABOUT THE AUTHOR Team Agorafy

Our mission is to be the most accurate resource for commercial listings, residential listings, and property information, allowing users to make highly-informed decisions based on current market data.

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