Landlords have the privilege and challenge of renting their properties to a range of niche demographics that offer unique benefits and drawbacks.
College students are one of the largest niche rental demographics. Though the market is large, it still begs the question:
Should I rent to college students?
As a landlord, it’s essential to protect both your income and your property by renting to tenants that are most likely to respect the property and pay rent on time.
On paper, it might seem like college students don’t fit the bill. However, that’s not actually the case. If done right, renting to college students can be a massively profitable and low-risk venture.
This guide explores everything you need to know about renting to college students and getting the most out of the experience.
Pros of Renting to College Students
Whether you’re a property manager or a landlord, if you have a college or university in the vicinity of your rental units, it’s likely that you’ll receive at least one rental application from a student.
When considering a student rental application, it’s crucial to consider the benefits and drawbacks of renting to a student. Here’s a breakdown of the pros of renting to students.
Renting in a college town offers the unique benefit of having a consistent demand of tenants. With each new year, there are tons of students looking for housing. It’s essential for college students to lock down their living situation early on. So, it’s typical for landlords and property managers to sign new leases a year in advance. Additionally, it’s customary for students to rent post-sophomore year. So, you’ll likely have the same tenants for two years before needing to look for more tenants.
Renting to college students means that you can significantly reduce your marketing budget. Simply list your property and maybe draw up some flyers to post around campus. Students need housing, so if your property offers close proximity to campus and additional necessities like groceries, you’ll likely find yourself inundated with applications.
Additionally, you may find yourself benefiting from the “student advantage” when your current student tenants recommend your property to their friends. In many cases, students will pass the lease down to friends from year to year.
Higher Rent Payments
On average, rents in college towns are higher than those of other markets. Typically, rent pricing in college towns is fixed to the college’s room and board rate, which is what students are used to paying after two years on campus.
In most cases, landlords can expect to charge upwards of 30% more based on the proximity to campus alone. However, additional amenities such as in-unit laundry, a backyard space, or storage can drive your rates even higher.
Students aren’t exactly known for their high standards. They’ll typically have much lower expectations than other more experienced renters, so you can save a significant amount of time and effort on upgrades that you would have to make to stay competitive in other markets.
Your property will likely be a student’s first time away from home and they’ll be happy with the bare necessities. They don’t want frills — they usually just want to have a space of their own that’s far away from their parents!
While on the surface, renting to students may seem like a risk, that’s not usually the case. In fact, most parents pay for their student’s rent payments. Parents or another third-party will act as co-signers to help make it easier for their student to get housing accommodations.
Additionally, you’ll likely be renting your property to multiple tenants. That greatly reduces the chances that you’ll ever receive a zero-percent rent payment. For example, if your lease covers five tenants and one tenant can’t pay, you’ll still be receiving 80% of that month’s rent revenue.
Roommates Can Reduce Financial Risk
College students are likely to have roommates to split costs and enjoy social interaction. Plus, it’s also a win for landlords. When roommates are splitting costs and lowering their individual rent burden, they’re more likely to pay the rent and do it on time. There’s also the potential for positive peer pressure in a roommate situation. The majority of the roommates paying rent are likely to pressure the one who isn’t to act financially responsible or replace them altogether.
Could Reduce Spending on Property Upgrades
Landlords feel less pressure to spend money on upgrades when renting to college students. After all, students aren’t known for being picky or having high standards for an apartment, especially when they’re in a class all day and want to enjoy the nightlife. Their options for a reasonably priced apartment are likely limited and their lease length typically only extends throughout the school year.
Cons of Renting to College Students
Although there are strong benefits, make sure you have a solid understanding of the drawbacks of renting to college students.
Limited Credit or Rental History
There are some cons to renting to college students, including limited credit or a nonexistent renters credit report. Many college students get their first credit card in college and have zero credit score, making it difficult to judge how they’ll handle rent payments and whether or not they’re financially responsible.
It’s not uncommon for college students to arrive on campus and have never rented an apartment or room before. They may have little to no personal or professional references to help vet their responsibility and reputation. The lack of rental history is a blank slate, and landlords can’t always assess if the renter is worth the risk or not.
Students are young adults, meaning that they are prone to making mistakes that are typical of people their age. They may experience growing pains and act irresponsibly. That can result in headaches for property managers and landlords alike, in the form of property damage, noise complaints, and more.
In short, all issues that are consistent with college life.
Most college students are inexperienced renters, new to paying bills, budgeting, and organizing their lives. Even if they’re financially responsible who will eventually make payments, that doesn’t mean they’ll always make them on time. It’s also possible their landlords will remind them about rent every month. Charging a late fee or sending out auto email and text reminders may also help.
May not understand how to file a maintenance request
Inexperienced renters may mean more administrative work on your end with a lack of understanding of how to address issues. They may not understand how to file a maintenance request or attempt to send the landlord receipts for the supplies they brought to do it themselves. Landlords should make sure anything related to requests is outlined properly in a lease, and information is left in the apartment for quick reference.
Noise complaints are also a potential issue, whether renting to college students or not. Landlords should outline how to address noise issues, from encouraging the tenant to resolve the issue to the process of filing a complaint. Of course, college students are known for loud music and parties. Landlords should manage expectations from the start on what level of noise is appropriate, quiet hours, and consequences for violating the rules outlined in the lease.
May Be Rowdy
College students have a reputation for partying for a reason. They’re prone to having large gatherings or coming home late at night and creating noise for surrounding neighbors. College students are also known to indulge in illegal drinking, which could result in a visit from the police and disturb other tenants.
Fewer Vetting Resources
For the most part, college students haven’t built up a rental history, employment history, or credit history. In short, they offer little to no valuable information that can help you vet them as applicants.
High Tenant Turnover
It would be nice to have long-term tenants that offer a consistent revenue stream and responsible renting. However, that’s not the nature of college student rentals. You’ll experience high tenant turnover between academic years.
The good thing is this problem is balanced by high demand. However, the end result is still a higher turnover percentage then you’d experience with traditional renters.
Renting to students is highly regulated with standards that vary based on the market. Generally, investors are mandated to submit applications to their local county offices. Those will determine whether they are allowed to rent to students.
How to Minimize the Risks of Renting to College Students
If you’re considering renting to college students, you’ll need to be proactive when it comes to mitigating risks and avoiding problems before they happen. Not only do these methods protect you and your property, but they also protect your renters. Here are some of the best ways to minimize risks when renting to college students.
1. Upgrade Your Lease Agreement
Not only should you create a new rental agreement that is specifically tailored to college students, but you should also be sure to include terms that make your expectations clear.
2. Co-signer Requirement
As student renters can be a risky investment, be sure to require a cosigner in your lease agreement.
3. Clauses on Noise
Students are known for raucous parties. So, implementing rules regarding noise can make it difficult for students to throw these parties.
4. Maximum Occupancy and Visitors
Another way to reduce the chances of your property becoming party central is to ensure that you place limits on the maximum occupancy of the home. You can do this by limiting the number of guests each tenant is allowed to have and how long they can stay. This can help you avoid guests who become tenants.
5. Damages and Repairs
Be clear about who’s responsible for repairs in your lease agreement. However, make sure you’re knowledgeable about your state and local laws. Some states don’t permit landlords to charge tenants for repairs unless they directly caused them.
6. Rent “By the Bed”
Unfortunately, there may be cases in which you have to terminate a lease agreement. Renting “by the bed” ensures that even if one tenant is not adhering to the rules, the other tenants can stay.
7. Be Specific
College students can do a lot of questionable things in the name of fun. However, it’s important that none of these activities promote damage to your property. That’s why it’s essential for your lease agreement to stipulate specific rules that may include prohibiting weapons (even BB guns), limiting fire hazards by banning candle burning, bonfires, and fireworks, and barring roof access.
8. Charge for Utilities
High tenant turnover and multiple tenants aren’t conducive to routine utility payments. You don’t want to end up in a situation where you’re forced to cover utility payments that were in your tenant’s name. To avoid this, keep utilities in your name and add these payments to the rent rate.
9. Increase Your Security Deposit
Students may be likely to cause damage despite your best efforts. If your local laws permit it, increase your security deposit. This will reduce the chances that you end up paying for repairs out of pocket.
10. Conduct Inspections
Apartment inspections should be conducted regularly upon move-in, move-out, and routinely throughout the year. This allows you to get an idea of the state your tenants keep the apartment in and to determine the extent (if any) of damage that was caused during their stay.
Can You Refuse to Rent to College Students?
A: No, that would come under the heading of discrimination.
This is generally considered age discrimination under the Fair Housing Act, which protects renters against different forms of discrimination that would inhibit their ability to find housing. You should also be cognizant of any state-level laws regarding discrimination.
For example, the state of California bans arbitrary discrimination on factors such as student status. If you are found to have discriminated against a potential tenant, you can face consequences that range from fines to having to take classes.
Like with all rules, there is an exception. If your property is considered Section 8 federally subsidized housing, then you are not legally allowed to rent to students.
What are College Students Looking for in an Apartment?
Don’t take it for granted that students may not have high expectations when it comes to renting. They will still have needs and standards that your unit will need to meet to stay competitive. If you want to increase your chances of consistently landing student tenants, take these factors into account:
- Proximity to Campus
- Walkability & Access to University Transport
- Laundry Access
- Outside Spaces
- Proximity to Grocery Stores
- Parking – both assigned and off-street
Renting to any demographic is a roll of the dice. However, that doesn’t mean that the odds aren’t in your favor when it comes to renting to college students. In fact, with preparation and proactive steps, it can be easy to turn your college rental situation into a lucrative and low-risk investment.
Be sure to read up on your state and local laws before delving into the student rental industry. Not only will this help you avoid any sticky situations with the law, but it’ll also enable you to structure your lease agreement in compliance with regulations.
Source: Apartment List