Here where I live, I have the opportunity to purchase some inexpensive homes to rent to the students of a local trade school to use as dorm-style living. My husband happens to work at this school, so we know that there is a significant need for housing for these kids that come from all over the USA. They typically spend 1 year in this school to become certified in the auto mechanic industry.
Our goal is to purchase several 3 and 4 bedroom homes and rent out individual rooms for an average of $500 per pop. We figure each home will generate a positive income flow of $700-1,000+ each month after the mortgage/taxes/insurance are paid.
Here’s my plight. I do realize that a student is pretty much at the bottom of the barrel in terms of the tenant most landlords really want. No credit, poor credit, and likely to party and trash the place. I’m thinking of a very strict lease with loads of rules to try to scare of the bad eggs. Also, I’ve been told to put ALL the students in the home on ONE lease–so that they are each individually reponsible for making the rent even if one of 'em bails. Also, I understand that you should try to get parents to sign the lease too.
Does anyone have a lease that they can share that they’ve used for college kids? Also, what other pitfalls should I be looking out for? Does this seem like a viable business idea, or am i just headed for a heap of headaches?
As a recent college graduate with a hug interest in REI I think I may be able to answer some of these questions.
You may have an easier time renting out the rooms if there are seperate leases, especially since the time at the school is only one year and the students will not have that much time to meet people and decided to live together. I would think you would have to be willing to deal with roomate problems in the situation of seperate leases, but you could offer “roomate matching services” as well. Having one lease per house with all the students on it is less risk, but harder to come by for the above reason. Getting the parents to sign may be a good idea but I have never had to do it and I have never heard of other students having that requirement. (could just be my market)
Oh, and most college students dont have poor credit… you cant even get credit in your name until you are 18.
I think college students are a great market to rent to. There will always be a supply of tennets, their parents can bail them out, and they dont expect much from their landlords…
During a REI course I listened to they had someone come on who had a full time job and did REI on the side. Some of his recommendations… Meet all of the people who are going to be living there face-to-face so they have some of their personal reputation at stake. ALWAYS have a woman in the mix as they’re just more likely to take care of the place better than your typical guy might. And be sure to check references!
For me, I’m relatively new to the investment game but I did manage to sign a Lease Option for our old house and now have a nice family living there with a positive cash-flow coming in each month and they have never been late on a payment. I’m now looking at a 6 unit property near a nearby university where I would expect most of the tenants to be students. I’m sure I’ll have the same concerns as you if I do get the deal to go through but as Brad said, you will always have a supply of tenants. The way I look at it is that if you as a landlord show the people living in your property that you care about its upkeep and making it a nice place to live for them, that they will return the favor and not trash the place too badly. No guarantee, but that’s what the reference checks are for.
$500/room? Where are you? That is an outrageous rate for a college student, or a trade school program (which this sounds like). How are you thinking of structuring your lease with respect to utilities, etc? If their rent includes utilities – this does insure you make the payments yourself, ontime and makes your rent seem a bit more reasonable (but it’s still high for where I am). If they are responsible for the utilities there is another huge can of worms – but they won’t be your worms LOL.
Personally, I would not go for one lease for the group – one-year students may not know their co-tenants and if they have a brain they would NEVER sign a lease with someone they don’t know. It’s like co-signing for a stranger.
As a Mom who is almost ready to send a son off to college, he’s a slob, I’d never rent to him LOL. Frankly I worry for his roommates – but they are his friends and know what they are getting themselves into. This won’t be happening for another year, however, the property requires that we, as parents, sign the lease and it’s one lease. I know the parents of the other kids, so I’m cool with it and I’m very confident, if I ended up it court, how it would go. I will keep my end of the bargain and I keep excellent records and I’m positive the other parents will as well, but you can never know what life will throw at you.
Keep us posted. This sounds very interesting. And, good luck to you!
I have been looking at college renting as well. I saw several opportunities in Gainsville. (the home of University of Florida) But I’m as new as it can be so I don’t know if this will be a good idea or not. One thing for you to think about is to check the zoning in your town and make sure that they allow you to rent out the room individually. Some States has a law that only allow maximum of 2 unrelated adults to live in one house. (not sure about the detail) but you should still check it out.
Coming from a recent college grad… $500.00/room is outrageous. I would have to cut corners and have a roomate sharing my room in order to afford the rent. That would prolly impose a problem with the other renters sharing the house. At that rate, please keep furnishings in mind. I rented at a apartment with 3 other roomates but we all had our own bathroom and shared the kitchen and living area. But the apartment was 100% furnished with high speed internet access. 425/mth per person.