If your rental property is located in a college town or in a city near a campus, you’re in the prime market for college student renters. According to the College Board, 44% of college students live off campus—that’s millions of students looking for housing each year. Of course, many landlords have their doubts when renting to this younger, less mature group, but with high demand, low vacancies, and chance to charge competitive rent, property owners can’t ignore this opportunity. And, with some strategies to minimize the risks, you can be well on your way to a lucrative rental opportunity.
What College Students Want Most in a Rental
College students have slightly different priorities for a rental than typical long-term renters. They value proximity to campus and affordability over premium amenities and space. When the alternative is dorm living, which can come with the same (or even higher) price tag as off-campus housing, what most students want is a decent, no-frills place where they can sleep and get their work done.
Students know upgrades can drive up the price, which means you can get away with saving money on costly renovations and contemporary updates—they don’t care about a granite backsplash or new appliances. All they need is a functional home that meets the requirements of the implied warranty of habitability (working gas, heating, electric, plumbing systems; operational sinks, toilets, showers; non-leaking roofs and walls; freedom from health hazards and pests; etc.). However, there are some amenities that would increase the quality of their rental experience and would give your unit a leg up over competitors and help you maximize your price.
- Proximity to campus: Students will be spending the most time on campus for classes, work, studying, and extracurricular activities, so naturally they’d prefer to be closer.
- Walkability and accessibility to public transit: Not all students have cars and on some campuses, students rely heavily on public transportation or bike share programs. It’s important the rental is not only walkable to campus, but also to shopping, dining, and entertainment.
- Affordability: Because students usually don’t have a significant income, affordability is key. Many students choose to split the price of a rental with roommates to keep costs down and save money for other expenses. You want to make sure your unit is on par with fair market rent, but also affordable to students. Check what the rates are for similar rentals in the area to get an idea of what you should be charging. Updates are nice if they’re within the budget and the price is comparable with other units that aren’t updated.
- Laundry: Going to a laundromat is a serious hassle for most students, so if you can make it easy enough for them to wash their clothes, they’ll appreciate it. An on-site washer and dryer, whether it’s in-unit or in a common area shared between units, will make your rental more desirable than other units with no laundry.
- Wifi: Students need high-speed internet to get their work done, not to mention stream movies, TV, and music, as well as browse the web and play games. Your rental will be more appealing if it’s optimized to offer quality internet service with options for providers and packages. You could also consider including wifi as a bonus amenity and either offering it for free or wrapping it up in the price of rent. That’s one less bill for the students to pay and a lot of added convenience.
- Safety: Students (as well as their parents who may be footing the cost of rent) want to know where they’re living is safe. A rental with good exterior lighting and deadbolts is important as well as a secure area for packages and mail.
If your property fits the ticket and is desirable to the student market after reviewing this list of priorities, read on to find out the advantages and disadvantages of student renters.
Pros of Renting to College Students
College students may have a bad rap, but really, there are plenty of perks when it comes to renting to students.
#1: High (and Stable) Demand For Rentals
As long as the school keeps accepting students, there will be a market for your unit. Most schools don’t offer four years of housing, which means thousands of students will be on the hunt for a place to live. Additionally, this demand happens annually, which means you don’t have to worry about vacancies.
#2: Higher Rents
Students are looking for affordability, so many choose to live with roommates to split rent. However, when you have multiple tenants paying rent on one lease, you can up the price while keeping it affordable. For example, you might charge a family $2,000 a month to rent your three-bedroom condo, but be able to charge a higher $2,250/month for students, which works out to a more affordable $750/person and more money for you.
Additionally, a constant need for housing near campus means you can up your price. When the demand for anything is high, you can get away with charging more (just not too much more). According to Fortune Builders, an average house near a college town can yield 30-40% higher rents than the same house five miles away.
#3: Stable Payments from a Third Party
It’s less likely the student will actually be the person paying their rent. Typically a parent figure or financial aid will cover the cost of housing and living expenses. When a more responsible party is involved, you’re more likely to get your rent payment on time and in full each month. Additionally, some parents and financial aid packages prefer to pay a full semester’s rent in advance. That’s peace of mind for everyone involved.
#4: Low Marketing Costs
Sheer location will be the reason why your rental gets filled so fast. Additionally, word of mouth fills vacancies, and it’s not uncommon for friends of your previous tenants to request to take over the lease. Depending on the college you’re located near, you can work with student housing to promote your listings and you can also post for free on student websites.
#5: Save Time and Money on Upgrades
Like we said earlier, students aren’t looking for a high end apartment with premium updates. They’re typically satisfied with less as long as it’s in decent condition and close to campus. You can get away with skipping that extra coat of paint—it’s less likely they’ll inspect every detail.
Cons of Renting to College Students & Ways to Minimize the Risks
Though there can be lots of benefits when renting to students, they’re not always the most mature and responsible bunch. Here’s what you should look out for if you’re considering student tenants.
#1: No Rental, Credit or Employment History
This may be the biggest risk when renting to college students. Because they’re young and likely don’t have any experience with rentals or paying debt, screening them may be a lot more challenging. You likely won’t find the information you need to determine if they’d be good renters, cause few problems, pay rent on time, and whatever other standard screening criteria you may have.
However, call all of their references to get an idea of their character. Also, check if the student has been expelled from student housing—this would be the equivalent of an eviction.
Solutions: Require a cosigner if the tenant has insufficient credit history. Adding the parent’s name to the lease will make them financially responsible for following through with rent payments or covering the cost of damage. Some landlords require cosigners for all student tenants, even if they have a rental/credit history. Just be sure to screen the cosigner as well to determine they are a credible person who can uphold their end of the lease. Students may also act more responsibly knowing you can reach out to their parent in the event of a problem like non-payment or damage. Additionally, because the student also doesn’t have credit history, require a security deposit.
#2: Inexperience Maintaining Property
These students are likely first-time renters. That means they’re probably inexperienced with basic property upkeep. If they’re sloppy, you run the risk of getting rodents or other pest infestations. They also might not report small maintenance issues that can turn into bigger problems, like a roof leak or faulty stove.
The occasional party and a high number of guests can also accelerate normal wear and tear, and you also might return to the property at the conclusion of the lease to find more significant damage. Because this is a temporary place to live, they might not treat it with the same respect as they would more permanent housing. This negligence could have big time consequences if you don’t stay on top of the property.
Solutions: This is where your security deposit will come in handy. Charge the maximum amount you legally can to protect yourself against any damages. Also add language to your lease that requires your renters to report damage, especially water damage, immediately. Make it easy for tenants to submit reports through an online maintenance request system or via text. Having a cosigner can also discourage negligence if a parent is on the hook to pay for repairs. Additionally, conduct a walk through during move in to get everyone on the same page about the condition of the apartment. Then, conduct routine inspections every 4-6 months (note this in the lease) to ensure the unit is in good condition—just give your tenants 24 hours notice in advance.
#3: Inexperience Paying Rent
College students are still learning the art of money management. Sticking to a budget can be challenging, so allocating the right amount of funds per month for rent might not always happen. They also may simply forget to pay on time. Even if a parent is funneling money into their student’s account to pay rent, there’s no guarantee the student will use the money for rent or pay on time.
Solutions: There are many ways to reduce late or incomplete payments: Implement an electronic payment system and make payments automatic, create a payment reminder system (as simple as sending an email/text), or enforce reasonable late fees. Additionally, add a clause to the lease that all parties on the lease are “jointly and severally liable” for paying rent in full (meaning if one tenant can’t pay, the others have to pick up the slack). This clause also insures you if not all rooms are full. Again, having the maximum security deposit can help protect your bottom line as well.
#4: Noise Complaints
Despite what Hollywood depicts, most students aren’t throwing big parties every weekend. However, students can get loud, especially if you’re renting to a bunch of roommates.
Solutions: Add a clause to your lease implementing (and enforcing) quiet hours or a noise curfew to keep the noise down for your neighbors. Additionally, enforce a guest policy that imposes a maximum number of guests your tenants can have at any given time. Also install a security camera near the entrance to the property so you can monitor who’s coming and going to see if they’re violating your guest policy. While you’re at it, consider listing some rules that might seem obvious but are necessary for this group—prohibit jumping out of windows or off balconies, lighting candles or fireworks, having pets, and shooting BB guns or paintball guns (or handling any weapon for that matter) on the property.
#5: Frequent Turnover and Summer Vacancies
Yearly turnover is common with students. Most students enroll in a degree program for four years, and there’s no guarantee their housing plans and funding will stay the same year to year. This also means students would likely be less open to signing a lease for longer than a year. Another effect of frequent turnover is that you’ll have to make repairs and find new tenants annually. You also risk that if for some reason your unit is vacant the time classes begin, it will be challenging to fill the unit until the following semester starts.
Students also typically sign short-term leases that run the length of the school year, which means you might have to find different renters for a summer term. If you have student tenants sign year long leases, they frequently sublet their rooms during the summer while they’re away. That means they open your property up to individuals you didn’t screen and don’t know anything about.
Solutions: Offer perks for repeat tenants or referrals. Have students sign leases for the full year even if they don’t intend on living there for all of the summer months and impose strict rules about subletting within the lease. If that isn’t the norm in your location, try offering year-long leases with the summer months discounted.
#6: Lack of Concern for Utilities
Students may blast the heat or A/C, leave water running, or keep the lights on by accident. And that means high utility bills.
Solutions: Stipulate that the tenant pays utilities. This will teach them to manage their usage and take the cost off of you. If you can’t separate utilities by unit, try estimating what utilities would cost and build it into the rent.
Can You Refuse To Rent to College Students?
The answer is mostly no. Refusing to rent to students would be considered discrimination in most cases. Most undergraduate student renters fall between ages 18-25, and The Fair Housing Act prohibits discrimination based on age. Additionally, some states like California prohibit discrimination based on an arbitrary characteristic, which would be student status.
The only exception that allows the denial of student renters is for federally subsidized housing programs. That is, if your rental is Section 8 housing, you’re actually prohibited from accepting students as tenants.
Should You Rent to College Students?
Though these types of tenants come with their fair share of pros and cons, renting to college students can be a fairly reliable and lucrative source of passive income due to the high and consistent demand for housing near campus. Regardless, you have to carefully screen all potential tenants and cosigners to make sure they’ll be responsible, reliable renters.
If your rental is purely an investment property, go for it. Your return will be significant because you can charge higher rent while making fewer significant (and costly) upgrades—plug your numbers to get a clear picture of your ROI.
If your rental is a family home that has sentimental value to you, be more particular with your screening criteria. Also set clear expectations in the lease on how your tenants should do their part in maintaining the home. You want to make sure you’re renting your property to tenants who will take good care of the property and treat it with respect.
Make your lease agreement as strong as possible with specifics on how you plan to handle each scenario to avoid miscommunication and gray areas. When all parties are signing the lease—roommates and cosigners—explicitly go over each aspect. This added clarity will help everyone know what the procedures and expectations are for a smooth leasing period. Additionally, students are notoriously known for violating their leases, so set the consequences (and enforce them) of what will happen if they do breach it. And don’t forget to get emergency contact info for each tenant as well.
Because student renters may require a little more guidance than your typical tenants, being an absentee landlord could pose a challenge. All Property Management recommends either keeping your permanent residence close to your student rental housing or hiring a local property manager.
When you work with a property manager (whether you’re local or absentee), they’ll handle all of the complicated parts of leasing, maintenance, and tenant management, whether you have student renters or not. From receiving applications, to screening potential renters, to dealing with tenant communication, to making repairs, filling vacancies, setting fair market rent, and so on, a property management company does all the work so you can enjoy a hands-off cash flow. Need more reasons to hire a property manager? Check out our popular article on the top 10 reasons why property managers are worth hiring.
By Allison Rebecca Penn
