Are you considering investing in rental property that is near a university? Keep in mind that while there will be a great demand for housing; many of those looking are students. While some university students are very responsible, there may be others that remind you of that movie “Animal House,” where everything that can go wrong in a property very messily does so. Just do the proper screening and lay down some basic rules and the chances of your unit becoming an out-of-control party central decreases dramatically.
In the United States, students are usually offered one-year leases. In Canada, where the norm has been to follow the school term and offer eight-month leases, there appears to be a change afoot. The year leases are becoming popular on this side of the border. So, what happens with that extra four months? Since legally the tenants must pay for those four months, many may consider subletting, rather than pay for something not used.
The sub-let is where landlords sometimes get into trouble. The student is doing the screening and may not be as diligent as the owner. Then again, it’s just as easy for the landlord to miss something in the initial screening. But universities that offer summer programs often have their own co-op programs that find housing for students during that semester. The odds of finding a responsible party increase dramatically.
How to Handle Damages
Mention damages in student housing and visions of partiers in togas guzzling endless amounts of beer sometimes come to mind. Newsflash: most college students are there to get an education. Yes there are those who like to party hard and find university life just an excuse to do so, but there are others looking for a good start to life.
Property damage is an issue. Developers putting in new units near universities have gotten smart about it. The new construction makes good use of concrete, a material able to withstand the antics of the rowdy few. Ever try and punch a hole in cement with your fist? Chances are you’ll only do it once.
Student rental housing that is within walking distance of school or public transit draws more interest than units out in the middle of almost nowhere. You’ll be able to get more applicants and then can pick the best of the best. Students also want properties that are close to shopping, entertainment, grocery stores and nightlife. If you don’t have a laundry room in the unit or the complex, that is also a big issue.
Students often rely on financial aid and/or part time employment to keep up with expenses during the school year. It’s not like renting to someone with an established, steady job and thus can be a bit more of a risk. Many landlords ask parents to co-sign, which gives an added measure of security to the deal. If the student can’t come up with the rent, you can go to the parents to pick up the slack. Most parents are fine with this, since housing is part of a school expense.
Students are opting to live in an apartment because they don’t want the bare-bones lifestyle or lack of privacy offered in a dorm. Developers are catching on and building properties with additional amenities, such as game rooms and movie rooms. Of course a laundry room is high on the list. Occasionally you will find an onsite pool. As in other types of rental housing, things are getting more competitive and the more amenities you have to offer, the better your chances of attracting quality renters.
Is It Worth It?
So, is getting into the student housing market worth it? It does require a bit more management and having to rent out the units more often than in a typical building. If you’re lucky you’ll get a good tenant that stays with you throughout their university career. Most of the time tenants stay for a year or two and move on.
The other issue is bank financing. Many banks prefer not to finance older student housing buildings. Then again, that may be a regional phenomenon. The student housing market is different in Vancouver from that in Toronto. Either way, as long as you understand that there is extra management work involved, and more risk, you can enjoy a decent cash flow from this real estate sector.