Maybe you remember the struggle from your college days: searching online, checking listings in the newspaper, and driving around town trying to find a place to rent. And perhaps now (ahem) years later, a property in a college town near you has caught your eye. Should you go for it and become part of the student housing solution?
If you're not already a landlord, you'll probably want to begin by considering the pros and cons of becoming one. If you already know you want to own a rental property or are looking to add another to your real estate investing portfolio, the next step is to explore the specific concerns student housing landlords face. Let's explore the risks and potential rewards of becoming a student housing landlord.
Screen tenants thoroughly
As a landlord, doing all you can to ensure you're taking on a reliable, responsible tenant is crucial to your bottom line. If you aren't careful, you could wind up with tenants who never pay rent on time or trash the property. And if you own a multifamily property, a bad tenant can make your responsible long-term tenants miserable.
References are an important part of the tenant screening process. But young college students often arrive with no rental history. So how can you thoroughly screen a tenant in this situation?
Attorney David Reischer has been a practicing attorney in New York State with a specialization in real estate transactions, family law, business law, and other general practice matters for over 16 years, and he has some advice.
"A landlord may legally conduct a background check on a student renter and review their employment history, credit history, and criminal history," Reischer tells me.
It may also be helpful to find out how serious the student you're dealing with is. "If a landlord receives written permission to request a transcript, then the landlord can review the student's grades to determine whether the student is likely to be a responsible tenant," Reischer says. He recommends getting a certified copy of the transcript directly from the school.
Meet the parents
I'm telling your mother! It's a threat that can terrify plenty of full-grown adults. That's why getting parents involved from the get-go can help ensure prompt payment and reduce your property's chances of becoming the "party house" on campus.
According to Reischer, you can accomplish this by requesting the contact info of your student tenants' parents or even having their parents sign the lease agreement. This can help you get around the problem of student tenants having no real assets to place a lien upon, in the event that they trash the property.
"Parental signatures also allow for the landlord to bring a lawsuit against a named party in which a judgment can be secured against any owned assets," Reischer adds.
When it comes to potential damage, prevention should be your primary goal. That said, even going above and beyond in tenant screening can't guarantee that all will go as planned. That's why you'll want to be prepared for all worst-case scenarios.
"Foremost, property damage is a landlord's worst nightmare, so it is critical to have a lease agreement that protects the landlord if there are significant damages to the property or other parties are injured by the student tenant's conduct," Reischer says. "A lease agreement should request sufficient monies beyond the typical first and last month's rent and request an additional emergency fund in case there are extraordinary damages."
Your tenant also needs to understand how to do their part to help you stay on top of potential maintenance and repair issues before they become bigger, more costly problems. To that end, Reischer recommends providing your tenants with the contact numbers they'll need to address any plumbing, heating, electrical, sanitation, or other situations that may need resolving during their tenancy.
Finally, you can mitigate the risk of renting to college students by requiring renters insurance from your student tenants. "Renters insurance covers the policyholder in case of a lawsuit and can therefore offer the landlord extra protection when needing to hold the student tenant liable for damages from accidental injuries or damage to the property," Reischer explains.
Weigh the pros and cons of renting to students
Rental housing is often in short supply in college towns. That means becoming a student housing landlord comes with the perk of an almost guaranteed supply of interested prospective tenants. And if you implement some of this advice, you can dramatically reduce the risks of renting to this demographic. With some careful planning, becoming a student housing landlord could be a very lucrative move.