Have you ever wondered what it would be like to own a passive income portfolio full of properties near college campuses? For what its worth, renting to college students is a very viable exit strategy for those that are prepared.
It has been said that the pinnacle of one’s real estate investing career is defined by the success of their passive income portfolio. After all, who wouldn’t want to sit back and collect rent checks? Not surprisingly, there are several ways in which a profitable rental portfolio may be established, but one exit strategy in particular seems to have more potential than the others: renting to college students. Having said that, renting to college students may have its challenges, but few will argue its viability. If for nothing else, renting out a passive income property to college students may be one of the best ways to build up a steady cash flow.
Let’s take a look at why passive income investors should consider renting to college students:
Those fortunate enough to own a rental property within close proximity to a college campus are probably already aware of the demand that inherently comes with the territory. Any property within walking distance of a campus will always attract the attention of current and future students. Outside of student housing, nearby rental properties are essentially the only alternative awarded to those attending the school. In fact, the level of demand awarded to college student rental properties may very we’ll be attributed to the dearth of alternatives in a respective area; students need housing and are therefore forced to choose from what is available in a specific area. Those who come out on top are those passive income investors that cater to the needs of the majority. Renting to college students is as simple as owning a property near campus and combining simple amenities with affordability.
Simple economics will tell you supply and demand holds a considerable amount of weight in the real estate industry. For better or for worse, the more desirable a property is, the more likely it is going to cost more. Not surprisingly, the same holds true for rent: the more desirable the location, the more a property can demand in the form of rent.
As it turns out, the quality of a property and the amount it is renting for will generate quite a bit of demand, but location is king in college communities. The closer a rental property is to campus, the more people will want to call it home. That demand will create a perceived value; one that will permit homeowners to charge more for rent than those properties that are two or even just three blocks away.
Consider this; owning a property located next to a college campus will have just as much demand as one situated a block from the beach. Students are, more or less, forced to choose between properties located within a certain radius of the school. Those looking to generate some passive income in a college community will find that demand works in their favor on more levels than one. Not only will there always be someone looking to rent the property, but that same demand will drive up asking prices.
As I am sure you have guessed by now, nearly every benefit of renting to college students stems from demand. Not only can landlords charge more, but they can essentially market with little to no effort. If for nothing else, passive income properties in college areas are entirely capable of marketing themselves. In fact, there may be no easier type of property to market than that of a passive income property located close to a college campus. Properties located next to college campuses have a significant advantage over what we might call typical single-family homes: word of mouth referrals.
Provided you have done your job as a landlord, there is no reason tenants won’t recommend your property to friends. Referrals, for what they are worth, are invaluable to passive income investors and serve as a cheap mechanic to mitigate vacancies.
Now that you are familiar with a few of the added benefits that coincide with renting to college students, let’s take a look at which properties warrant your consideration. There are, after all, subtle differences that you will want to account for when looking for the perfect property to rent out to college students. If you want to realize a passive income stream capable of providing impressive cash flow, you must know what to look for:
Location: In choosing a passive income property, do not forget the cardinal rule of real estate: location, location, location. The first thing you must do is consider the property’s location. If for nothing else, you can always change the features of a home, but you will never be able to change its location. More often than not, the closer the property is to a college campus, the better. You could argue that occupancy rates improve the closer you get to campus. However, that doesn’t mean you should acquire the home closest to campus without minding a little due diligence. Before you commit to buying a passive income property in a college area, do a little homework of your own and analyze market trends. Not all college campuses are created equal, and, therefore, an investment of this size will require you to identify the pockets of student housing that meet your specific criteria. Find out where the students want to live, and go from there.
Market Forecast: A sound exit strategy will only come to fruition if you put in the time and do the appropriate research, and passive income properties are no exception to the rule. Never commit to a passive income property without fully understanding what it is you are getting into; that means understanding past performances and future forecasts. Contact school officials or even the local municipality to determine whether or not any future projects are expected to impact home values. Does the college plan on expanding any time soon? Perhaps they are going to put in a new football stadium down the road. Find out what you can about upcoming projects and include them in your projections. Remember, the more you know, the easier it will be able to mitigate risk and maximize returns.
Housing Requirements: It is important to note that college campuses come in all shapes and sizes, and so do their requirements for student housing. While some of the major campuses will have strict rules forcing students to live on campus for at least one year, others are slightly less stringent. Either way, find out what your college requires of students, and work around it. At the very least, it will give you a good idea of the market share you intend to compete over.
Since renting to college students will come complete with an entirely different set of obstacles, it pays to know how to mitigate risk. If you are looking to rent out a passive income property near a college campus, use some of the following tips to avoid potential complications: