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The Pros and Cons of Renting to Students

Dec 24, 2019 by Maurie Backman
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As a real estate investor, buying a home in a college town and renting to students is a good way to make money. Properties near universities are often a good buy since they're easy to fill with tenants, and college students are often eager to find off-campus housing as an alternative to living in dorms. But are student tenants a good idea? Here, we'll explore the pros and cons of renting to students.

What are the benefits of renting to students?

If your real estate investing strategy involves buying rental properties and securing a steady stream of income with a consistent flow of tenants, then buying a home located near a college is a smart move. College town rentals are easy to fill, because once one student renter graduates and moves out, a new one is apt to come looking for student housing. As such, you won't have to worry about a lag in rent payments.

Another upside to renting to students is the potential to charge higher rent due to increased demand. As such, you might make more money from college student tenants than working tenants despite the fact that students generally have less income to spend. (Remember, it's not unheard of for a student's parents to help foot the bill when he or she is in school.)

Furthermore, students tend to have lower standards than working adults when it comes to household amenities, like updated bathrooms or stainless-steel appliances in their kitchens, so you may not need to sink so much money into improving the income property you buy. Chances are, student tenants won’t care about outdated countertops and cabinetry.

What are the drawbacks of renting to students?

Though renting to students is a good way to generate passive income, there are a few pitfalls you might encounter. For one thing, students, by nature, aren't always as mature and mindful as older tenants. As such, your risk of property damage may be higher when you rent to students (think keg parties on a weekly basis). And while you can mitigate that risk by collecting a security deposit upfront, it may not be enough to cover your repairs after the fact.

Furthermore, student tenants may be less mindful of the terms of their lease agreements, such as your guest or quiet hours policy. As such, you may get a lot of noise complaints, which are not only a headache but could result in a scenario where you're forced to deal with evicting your tenants.

Another issue with renting to students is high turnover. If you're renting to students in their senior year of college, they're out of there once their final school year ends, and while finding replacement tenants should be fairly easy, you still take the risk of not knowing what sort of tenants you're going to wind up with. And unfortunately, tenant screenings become more difficult when you're dealing with students. They may not have much of a credit history and may not have references from previous landlords, either.

Finally, when you rent to students, you may have trouble getting your tenants to agree to a full-year lease. Many college students take the summer off and therefore don't want to pay for several months of housing they're not using. The result? You could have your home unoccupied for several months during the year.

Should you rent to students?

If you’re able to buy an affordable property in a college town, then renting to students is a good way to generate continuous income. Just be aware of the drawbacks involved before moving forward.

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