According to the National Multifamily Housing Council (NMHC), a substantial chunk of the American rental housing market is driven by the high demand for off-campus accommodations. This demand, the NMHC said, comes mostly from students who wish to have more privacy and amenities than what is offered by their schools’ dormitories.
Off-campus housing is projected to reach even greater heights within the next few years, given that the number of college students is expected to grow well over 20 million in 2029.
Homeowners—especially those who live in college towns—have started investing in properties that they can rent out to students.
Despite it being a potentially lucrative source of income, there are some things that homeowners and budding landlords need to know before renting out their properties to college students.
Here are some of them:
Students tend to go home at the end of the academic year
Some students are only interested in short-term leases, as they often go home to their families during the summer. This can pose problems for landlords who will then have to come up with plans to minimize the impact that summertime vacancies can have on their finances.
One way to address this is by offering students long-term leases with discounted rates for the summer month, as well as by adding in an “auto-renew” clause in the contract.
There is also the option to give the existing tenants the freedom to sublet the property and add someone new to their lease. Doing this not only ensures that the existing tenants have a place to come back to once the next academic year starts, it also ensures that the landlord does not miss out on any income during the summer.
Students may need co-signers on their leases
College students—even the ones with weekend jobs—often have insufficient credit history. This can be challenging, as a good credit history is needed to check against capacity to pay rent.
To solve this problem, landlords should require each prospective tenant to have a financially-qualified adult like their parents or their guardians as a cosigner. This will ensure that someone will be held financially responsible when it comes to paying rent, as well as covering any property damage that may be incurred by the tenant during their stay.
Landlords should also consider the fact that some college students prefer to lease properties as a group, as this helps bring down the cost of their individual rent.
However, this can pose problems for the landlord, especially when one of the tenants decides to drop out, stop paying rent, or gets evicted for violating house rules.
Landlords can mitigate this problem by offering the tenants a joint lease.
A joint lease acts as a safeguard against errant tenants because it renders each resident responsible for any property damage or lease violation that may occur during the group’s stay in the landlord’s property.
Students can be rough on other people’s properties
Many college students can be quite inexperienced when it comes to property upkeep—a problem that is compounded by their tendency to host massive and rowdy parties and get-togethers. This puts the landlord at a disadvantage, as the property would be exposed to far more wear and tear than if it were leased to professionals, for instance.
Charging a high security deposit—some states allow up to two months’ worth of rent—can help cover any property damages that may be incurred during the tenant’s stay.
Of course, a much better course of action is to prevent damage from occurring in the first place. This is made more likely by strictly enforcing ground rules, such as limiting the number of guests a tenant is allowed to bring over, as well as by listing activities that are not allowed on the property such as underage drinking and smoking.
Given the increasing demand for safe, student-friendly and high quality off-campus housing, renting properties to college students is a good business idea.
Those who are just new in the rental housing industry, however, may find it overwhelming at the start.
This is where Sundance Property Management comes in.
A full-service property management company based in the Midwest, Sundance Property Management is dedicated to helping new landlords with every aspect of the rental housing industry.