College-Age Tenants: What to Expect
Understanding your renter is one of the most effective ways to become the best landlord possible. When you know your demographic, you’re better able to cater to your tenants’ wants and needs and will be better prepared for the challenges that demographic may present.
If you are investing in rental property near a college campus, you should be ready to work with the college-age tenant. This specific group brings with it some very unique complications. Student housing investments can cause an extra headache every now and then, but they can be well worth it due to the demand for housing near college campuses.
Lack of Credit
Most of these tenants will be leasing with very little credit history. Even if they are funding their own living expenses, you should remember their age and the reality that they will likely have little to no credit built up. A survey done in spring of 2014 by Student Monitor found that 74% of college age students didn’t know what their credit score was.
Having a guarantor on the lease is something you should get used to. Knowing that the college age tenant will have a lack of credit, you should expect and encourage working a guarantor into your leasing agreement (and be sure to secure your lease with a Joint and Several Liability Clause).
Lack of credit can also mean these tenants are not used to managing bills and making payments. As their landlord, you should establish firm rules by implementing some sort of late fee schedule. If a late fee is set in place and enforced, the tenants will begin prioritizing timely rental payments.
Student’s Value Different Things
This demographic has a list of priorities when it comes to looking for housing. Their top concerns will be location and affordability. Although there has been a rise in high end student housing, college-age tenants are not beholden to the finest furnishings. They typically look for a comfortable and fun living environment and expect “student housing” standards of living. It is not a bad idea to give cushion time between leasing terms to make sure your property is in your ideal rentable condition prior to the next tenant move in.
The turnover rate is high in student housing, but so is the demand. But it’s important to know your market. Near many universities, subletting will be a common practice, particularly if local lease agreements have not adjusted to the school schedule (e.g. 9-month leases). If you expect to run into subleasing, it is just as important to screen the subletting tenants as it is to screen the original lease-signing tenants. This should be discussed with all parties. At the time of signing the original agreement, you should make sure your tenants fully understand your expectations and guidelines with regard to subletting.
Campus location can predetermine how far out you will be leasing in advance. If your campus is located away from an urban environment (i.e. the typical small college town) you should be prepared for a high demand on your property with students interested in signing agreements well in advance of the actual lease term. Talk to other landlords in the area and understand what the standards are for the market. One of the biggest benefits of renting to students is word-of-mouth marketing so you should not have to spend much time or effort advertising your property.
Investing in student housing can be very lucrative if you can prepare accordingly and you understand the demands of the market. Know that no two tenants will be the same, but there will be trends that will be similar in each market in which you invest. Use your potential clients for advice. Talk to students and find out where they think the most desirable place is to live. Ask them why they feel that way. This will be your best asset to investing in the right location and the right property around a campus.
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