Are Student Rentals Right For You?
Student rentals are my favourite type of property. Why? Because they offer a great return on investment. I’ve been investing in them for almost 20 years and to date they are still the most profitable properties in my real estate portfolio.
In my opinion, there are a couple of reasons why renting to students is one of the safest bets when it comes to income properties. One is that you can rent by the room, which increases your bottom line, and the other is that as long as you’re in the right location, you will never lack tenants. Still, there are some specific details you’ll need to understand in order to be successful.
The most important thing to consider if you want to own a student rental is location. I have yet to find a university or college town that had enough student housing, so you shouldn’t have any problem attracting tenants as long as you’re in one of these towns. The further out you go, the harder it will be to find tenants.
Student rentals have a high turnover rate, meaning it will be up to you to find new tenants once a year. This will involve posting the listing, reading applications, screening tenants, and taking care of maintenance issues between renters—minor fixes and painting for example. There’s a lot of turnover, but it’s a very predictable rental cycle, so you know exactly when and how often it will happen.
Keep in mind that your tenants will be young and possibly living on their own for the first time. As a result, they might not know how to deal with simple issues around the house. This means that even small things like clogged toilets or tripped breakers may result in a phone call or house visit. You can help limit your involvement by leaving detailed information about the mechanics of the house (i.e. make sure they know where the breaker panel is and how to reset it). However, landlords of student rentals usually need to be pretty “hands-on.”
I always say that the calibre of your rental will determine the calibre of your tenants. But in the case of student rentals, there’s no need for expensive finishes like quartz counters and hardwood floors. The units need to be clean, safe and functional, but high-end materials won’t give you a good return on investment.
Also, because it’s a temporary residence, students may not take as much care with the place as other types of long-term tenants, and you don’t want to spend a lot of money on high-end finishes if the tenants are not going to take care of them properly.
One of the biggest fears people have about renting to students is that they won’t be responsible and might damage the property. Also, because they’re not used to being responsible for their own home, they may neglect certain issues. However, in many cases, you can limit some of the risk by asking the parents to co-sign the lease. Since many students are young, and are often on their own for the first time, it’s not an unusual or unfair request. This makes the default rate very low and gives you some added security.
Student rentals can be a terrific investment, but it takes a certain kind of landlord to make them successful. It takes a little more work than some other types of rental properties, but the payoff can be big.