Investing in single-family and multi-family homes around universities can be a challenge for some investors, but it is also an endeavor that can pay off when done correctly. Before diving into investment property in a university town, here are a few things to keep in mind so you can find success.
Location is Critical
Your primary market in a college town is likely to be students, but you may also get a few professors, adjuncts, coaches, and other university staff as well. For that reason, you want to make sure the property is within walking distance of the main campus as most students would prefer to avoid the hassle of maintaining a car and paying parking fees. Being within a couple of blocks may be ideal, but as long as the school is accessible by foot and bike and is within three-quarters of a mile from the epicenter of the university, it should be suitable for most student and faculty needs.
The demands of your student tenants are likely to be reasonable as most are looking to find something that’s affordable rather than worrying about how big the yard is or whether the grocery store is walkable. The surrounding neighborhood doesn’t need to have luxury amenities, but it also should not be questionable or unsafe. A good rule of thumb is to consider whether you would want your own college-aged children to live in the neighborhood.
Carefully Review Current Leases
During your due diligence process before entering into a contract of sale, be sure to carefully read and understand all the current leases for the property. Student leases are often a little different from a typical one, and a single unit could have separate contracts for each rather than one lease for the entire household.
This is a legal practice, but it can make the task of managing the investment property challenging, especially if the leases do not all end at the same time. For example, you could find yourself with an odd vacancy situation with units only being partially leased–and filling those vacancies can be tricky. It can also present a problem when assessing damage to common property such as stoves or walls as discovering who is responsible is a lengthy and troublesome process. You may want to consider asking the seller to get all the tenants within one unit onto a single lease.
It’s also important to find out if roommate agreements are in place, especially for students who are on individual leases. Such contracts often cover how things like utilities are paid as well as any “house rules” of the home such as quiet hours and overnight guests. While these agreements don’t typically include anything that is legally binding with the landlord, specific terms in a roommate agreement can be legally binding among the residents, especially those that deal with financial obligations. It would be wise to investigate these agreements to avoid possible hassles or misunderstandings in the future.
You will also want to be sure that all current leases end at an ideal time for the next school semester. Check with the school’s schedule as each university can be slightly different and aim to have your properties turn over just before the next session, so your vacancy rate remains low.
Gathering Tenant Information
Make sure you have all tenant information upon settlement. Rental properties near a university can have a high turnover rate, so it is essential to make sure the previous owner correctly kept track of the records. It’s crucial to have all current contact information as well as details about cosigners and guarantors to ensure you receive your rent payments each month – this will help when collecting for damages after move-out as well. If possible, it’s a good idea to have the rental applications for all current tenants, so you have critical details such as dates of birth and Social Security numbers in the event that evictions or collections become necessary.
Inspecting the Property
Recently renovated buildings and new construction projects can be prevalent around big universities, but it’s still important to take the proper inspection steps before investing in a rental property. Many of these new or renovated properties tend to be put together quickly for fast turnover, but this can lead to some issues that need to be addressed before leasing. For example, if inexpensive or flimsy materials are used, they may not stand up to the rigorous nature of college life, and you may end up spending a great deal on repairs.
If high-end materials such as granite countertops or plush carpeting are used, not only will college students be less likely to appreciate them (and be willing to pay extra), but those materials are not likely to remain in their luxurious state for long. So, it may also not be worth it for you to pay more for the property because of such features.
There may also be local landlords who do not adequately turn over a rental unit. This may result in high-traffic areas such as walls and floors needing significant cleaning or repair before the unit is ready. When negotiating the list price with a seller, keep these repair and maintenance issues in mind.
Investing in Rental Property Near a University
When choosing to invest in rental properties located near universities, there are several considerations that are particular for that environment – and it can be time-consuming to get all the details in order. From finding a location that will be convenient for students to get to and from class, non-standard leasing arrangements, and additional repairs and maintenance, it’s important to do your homework before entering into a contract. With the help of a property management company, you can ensure all the right information is gathered so you’ll be better positioned to make a profit from your investment. If you’re ready to get started, contact Bay Property Management Group in Philadelphia, the premier property management company in Philadelphia, today!