Most landlords choose a specialty or niche based on property type, rather than renter demographic. However, there are other ways to narrow your focus.
One popular niche is college students. If you decide to go this route, there are some of the nuances you’ll have to consider.
Why Rent to College Students?
College kids might not seem like the most attractive demographic for renters, but they can offer a range of benefits to you if you’re a landlord. Here are several of the top advantages:
- Steady demand. College enrollment gets higher each year. As schools expand their freshman classes, student housing shortages inevitably occur. This encourages the majority of students to seek off-campus housing after their first or second year. If you own a rental property in the area, you may never have any trouble finding renters.
- Higher rent potential. With college rental properties, you’re typically able to charge a higher rate (because each individual is required to sign his or her own lease). So instead of renting a house for $2,000 a month to a single renter, you might charge $500 per month to each of five renters, which means 25 percent more in monthly revenue.
- Lower expectations. We don’t say this to be disparaging (or to encourage any unethical practices), but college students tend to have lower expectations than working professionals who are out in the real world. They don’t demand that things are perfect. This reduces the pressure on your end and generally results in fewer maintenance requests.
College students are an often overlooked demographic in the rental market. For landlords who know how to target them and provide the right housing solutions, however, they’re a no-brainer niche. Could they become your next focus?
Tips for Managing College Rental Properties
Although the steady demand, high rent potential, and lower-than-average expectations make renting to college students a potentially lucrative option, let’s not presume it will be all butterflies and rainbows. There are distinct challenges, too.
If you’re going to excel in this niche, you need to have the proper approach. Here are several helpful tips for managing college rental properties.
1. Require Co-Signers
More than likely, student renters do not have any rental history or significant income. That being the case, you should routinely require co-signers or guarantors to minimize potentially costly issues.
Typically, the co-signer will be the student’s parents. When they sign the document, they basically put themselves on the hook to cover any unpaid rent or fees that the student renter doesn’t meet.
This is a very common approach with college rental properties. Any student renter who is serious about renting an off-campus property will be aware that this is part of the deal.
2. Set Up Individual Leases
Because you’ll have multiple individuals under a single roof, you should employ an individual leasing approach. Also known as “by-the-bedroom,” this method requires each individual renter to pay his or her own rent and security deposit.
Students like individual leases because this absolves them from being penalized if one of their roommates is late with making a rental payment. As the landlord, it empowers you to charge a slight premium.
3. Clearly Communicate Lease Terms
You should always assume that this will be the first time the college student has seen a lease agreement (let alone put his or her name on one). Set up a time to walk the person through the agreement and explain all the key elements. Give everyone a chance to ask questions.
Some of the areas to pay close attention to are renter’s insurance requirements, security deposit rules, pet policies, late fees, expectations with regard to landscaping and cleaning, etc.
4. Require 12-Month Leases
College students might only attend classes eight to nine months of the year. However, you should always require 12-month leases. Failure to do so could leave you with a vacant property 25 percent of the year, which would seriously hurt your cash flow.
Much as with co-signers, most college student renters have come to expect they’ll face a 12-month lease. If you get much pushback on it, you could always set up a “school year” lease for eight or nine months and charge more because of it. This will force tenants to choose between the two options.
5. Charge a High Deposit
Let’s just say it like it is: College students can be irresponsible and messy. This isn’t to say they all are, or that they intentionally behave in ways that harm your property.
But whenever there’s a stereotype, there’s usually some truth to it. So if you’re renting to college students, it’s wise to charge a high security deposit.
Although there are legal limits to how much you can charge, the fact that you’re setting up individual leases allows you to collect a deposit from each tenant. This means on a $2,500 lease, you might gather $5,000 (first month’s rent and last month’s rent from each tenant). Having this much set aside should make you feel more confident about any situation.
6. Use the Right Magnets
If you want to set your rental apart from the hundreds of other college rentals in your market, you might consider using “magnets.” These are built-in features or amenities that you “include” with the property.
For example, you could install a 65-inch flat-screen TV in the living room. This is something any college student would love to have, but probably doesn’t want to, or can’t, shell out the money for.
Happily, you can buy one for $500 or less and price it into the lease. If you get four renters, you basically tack on an extra $10 per month, and the TV is paid for by the time the lease agreement has ended.
You don’t have to tell the renters that you’re increasing the price for this reason. You just “bake” it into the price in the same way a hotel does when it includes a continental breakfast.
Work With Green Residential
At Green Residential, we take pride in helping landlords manage their rental properties with lower stress, greater clarity, and higher profitability. Whether you own college rental properties, single-family homes, multi-family complexes, or anything in between, we would love to partner with you to transform you from a landlord into a rental property owner.
Contact us today to get a free property management analysis!