When it comes to investing in real estate, location is everything. There are certain locations where demand is always high, which is key to ensuring profitability in this type of investing.
One such investment opportunity lies in student housing. Buying a property near colleges or universities will almost always afford you with the benefit of consistent demand. Students who choose not to live in dorms on campus still need someplace close by to live, which is where real estate investors can cash in on this in-demand market.
You’ll probably find it rather easy to find tenants. Just about every university or college town has some form of student housing available.
But like any other type of investment, it’s also important to be prudent about where to plunk down your hard-earned dollars when it comes to investing in student housing. Keep the following tips to make sure you’re profitable without taking on an unnecessary headache.
Try to Find a Unit as Close to the College as Possible
Choosing the right property is a crucial step in making sure you’re getting involved in a sound investment. Students typically prefer to rent places that are close to campus, usually within walking distance. Or else, something that’s within a quick bus ride to school or has a transit stop in close proximity also works.
The closer the unit is to the college, the more in demand it will be and the higher the rent you can charge.
Consider Renting by the Room
Rather than renting out an entire home, consider renting out the place by the room. This can help you collect more in rent money every month and beef up your bottom line. Students who want their own room without having to deal with others when it comes to rent might actually prefer this arrangement as opposed to renting to a group of students and charging one rent fee for the whole house.
For example, if you have a 4-bedroom home, you could potentially rent it out for $3,000 a month, hypothetically speaking. But if you rent out each individual bedroom and assign the kitchen and bathrooms as common spaces, you may be able to charge $900 per room instead. That would leave you with an extra $600 in your pocket every month.
Be Frugal With Your Finishes
If you buy a home that needs a little fixing up, be careful with how you finish the place. You’re not catering to buyers who are looking to call the place home for the long haul.
Instead, you’re offering a home to a demographic that doesn’t particularly care too much if the kitchen counters are granite versus laminate or if the floors are made of real wood versus vinyl. As long as the place is clean, functional, and decent-looking, you’re fine. Don’t spend money on things that won’t give you a good ROI.
Ask the Parents to Co-Sign the Lease
Students aren’t exactly known to have a ton of extra money lying around. In order to minimize the risks of being left hung to dry from lack of rent payment, you can ask the parents to be co-signers on the lease. This should reduce lease payment defaults.
Be Diligent About Lease Clauses
Students who are on their own for the first time will find this situation pretty exciting. But being young and having other priorities often means that students aren’t always the most reliable people when it comes to taking care of their place, especially since this is just a temporary situation. Students aren’t as responsible as long-term adult tenants might be, so there’s always a risk that they could do some major damage.
As such, be sure to make it very clear in the lease what will happen if a certain amount of damage is done. Clearly state how much money will be charged and how such fees will be payable.
Look Into Local Legislation
If you’re buying a property that’s not already designated student housing, you’ll have to do some due diligence to find out how your jurisdiction zones these types of dwellings.
There may be rules about how many rooms there can be and how many students can live in the place at once. There might also be student housing licenses that may be required, so find out if this is the case in the city you plan to buy in.
The Bottom Line
There’s plenty of money to be made investing in student housing. Be sure to work with a seasoned real estate agent who can help you make the right choice in property and speak with a mortgage broker who can give you all the ins and outs about the type of financing options you have available to you.