Leasing Your Rental to a College Student
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Leasing Your Rental to a College Student
Are you thinking of renting to a college student? Or maybe you're toying with the idea of buying a rental in a college town.
The truth is that when it comes to renting out your property, college students could either be a tremendously valuable source of income, or your worst nightmare -depending on how you look at it, and a few key factors that can make or break your success.
In this article, we'll uncover the pros and cons of renting to college students, and separate fact from fiction so what you know exactly what to expect when making the decision to rent, or purchase investment property in a college town. We'll also look at a few precautions that you can take, to help increase your chance of success when renting to this specific demographic.
Renting to College Students: The Benefits
First up, aren't college students all living in dorms?
Not necessarily! The truth is that not all students have access to dorms, or even want to live the dorm life. Some prefer having a place to call their own, while others may be mature students, or those who are attending grad school, and not willing to subject themselves to the dorms.
For landlords, there are a number of advantages to renting to these students. Here's a look at some of them now:
- Higher Demand
Having a rental near a college or university means lower vacancy rates. At least during the academic year, you'll have no shortage of prospective tenants. Many students find the idea of living in an actual house or apartment far more attractive than a dorm, especially if that house is nearby. For a look at the top 100 U.S. colleges and universities with the highest percentages of off-campus residence, take a look at this list. Most of these off-campus students will either live with their parents or in rentals.
- Fewer Expectations
Most college students have very few expectations when it comes to moving into what most likely will be their first home-away-from-home. Generally speaking, most will know that they won't be able to have the latest finishings and the finest furniture. Most college students are primarily concerned about the location of the property, and not so much if the appliances match or the bathroom has been recently upgraded. Create a decent home that is close to campus and you'll have your pick of tenants in no time.
- Consistent Rent
Often, parents will handle the rent for their college-age children. And if not, student loans are there to stand in as a backup. For most, this means that rent is paid either ahead of time, or on time. Consider getting prepaid for the semester, or having the student's parents on the lease as co-signers to save you from the hassle of chasing down rent when it's due.
Renting to College Students: The Risks
No demographic is completely risk-free, regardless of where your property's located or who you're renting to. However, as is the case with most rentals, with college student accommodations, many of the risks can easily be mitigated. Here's a look at some of the potential risks -and solutions now.
- A Higher Turnover Rate
Unfortunately, when school is out, your tenants may be too. Many students head home or away for work during the summer months -and you'll be back to an empty home. While it most likely won't stay empty for long, for many landlords, this can be a negative factor. In especially popular college towns, though, you may be able to get your students to agree to a year-long lease, rather than a month-to-month one -saving you from the prospect of summer vacancies.
- No Rental History
Another risk when renting to college-age students is that they won't have much of a rental history. For many, it will be their first time renting, which means that you'll be the first real landlord they are dealing with. While this could increase the risk, it doesn't always have to be a deal breaker. In many cases, you can get their parents to co-sign on the lease. Just be sure to run the co-signers through the usual tenant checks -as though they themselves were applicants.
- Noise and Parties
It's true. Many college students like to party. Parties can be a source of unwelcome noise and could result in damage to the property. We've all heard horror stories of rogue student tenants throwing parties and destroying rentals. But the good news is there are ways that you can reduce the risk of your rental becoming party central. One such step is to put noise restrictions and a no-party clause in the lease. You'll also want to outline the course of action that will be taken if the tenant violates these requirements, and ensure that your new tenant is clear on these terms.
- High Utility Bills
Finally, college students aren't exactly known for being thrifty with their heat, hot water, or A/C usage. If you handle the utilities at your rentals, you may want to consider having your tenants cover them instead. This will help to ensure that they are more responsible with the heat or air conditioning.
Tips for Success
While it's true that you aren't renting to a well-seasoned renter and might run into some unique problems along the way, there are a few things that you can do to mitigate the risks of renting to young tenants, and increase your chance of success.
- Consult an Attorney
First, it's a good idea to consult with an attorney and have them create a lease that's tailored to your needs when renting in a college town. This should include clauses on noise, maximum occupancy, and what happens when there's damage to the rental.
- Get Specific
You'll also want to get specific with the rules that are included in the lease. For safety reasons, you may want to consider banning candles and fireworks, as well as paintball guns, BB guns, or any weapons at the property. You'll also want to decide early on whether you are going to allow pets in your rental.
- Check In Frequently
Some landlords who rent to students check in on their rental a bit more frequently, to ensure that the property is being taken care of and treated right. Checking in every three months or so reminds first-time renters that you care about the condition of the property and that you expect them to keep it in good condition too.
- Take Care Mixing Business and Personal
If you have a college student of your own who's heading off to university, you may be contemplating the idea of buying a house near campus, and renting it to them. Perhaps your son or daughter will take on roommates, helping to make your venture even more profitable. This can be a great way to save on dorm costs, while at the same time giving you an opportunity to acquire an investment. When your student graduates, you can sell the property, or keep it and rent it to other students as it continues to serve as a source of passive income. But while this can work out to be a great idea, it certainly isn't without its risks. Many experienced landlords recommend avoiding mixing business and personal relationships. Make sure you have a plan in place for what happens if your student -or their roommate-friends fall behind on the rent. Ensure that you have a clear plan for damage that occurs at the rental. Finally, while this can be a great way to help your child to learn about investments and property management, keep in mind too that many teenagers and young adults are simply not mature enough to successfully oversee a rental. You know your child's responsibility level, and what they're capable of. Take a look at this helpful article on Bigger Pockets: Leasing a Rental to Your College Kid: Smart Financial Move or Potential Disaster?
- Get a Co-Signer
While co-signers are good to have for anyone without much rental history or verifiable income, you will also need co-signers for anyone who's under the age of 18, since minors can't enter into legally binding contracts.
- Don't Discriminate
Finally, keep in mind that as a landlord, you cannot discriminate when renting out your unit. This means that you must treat each prospective tenant fairly, and use the same screening criteria for each of them. You should also avoid advertising your rental as "students only, or "no students allowed." You have to give your applicants a fair and equal chance.
At the end of the day, it's important to ensure that you have a detailed lease that you require each of your renters to sign. With college students, especially those who have no prior rental history, it's a good idea to consider having a co-signer. It's also a good idea to ask for a few months' rent upfront, and to require a security deposit. Be sure to check your state laws on security deposits first though, so you're clear on the maximum amount that you can charge.
Remember, assume the best, but prepare for the worst. It's the best way to run a rental, whether it's in a college town or anywhere else.
Landlords: how do you feel about college town rentals? Parents, have you tried purchasing a property to rent to your progeny? How did it go?
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