Buying Real Estate for Cash Flow: College Student Housing | Access ...

This is the eighth post in the series Buying Real Estate for Cash Flow.

One often-overlooked niche in real estate is college student housing. It turns out that this type of housing often has some of the better investment returns even though it has a somewhat mixed reputation. For many people, when they hear of college student housing, they think of old properties, beer parties, and rowdy tenants. In my experience there are plenty of college areas that have better tenants than normal B-class properties.

Why is college student housing often a good source of positive cash flow?

First, many real estate investors avoid owning this type of property because they have a negative impression of it. This means there are fewer investors chasing these properties and thus lower prices. Second, students usually want to live within walking distance to campus and thus have a narrow range around the campus they want to live. This allows the owners to charge slightly higher rents than properties just a mile or two away. Thirdly, properties rent more based upon the price per room than the price for the whole unit. A 4-bedroom property that normally rents for $1250 might rent to students for $400/room or $1600 per month.

Below are some reasons you might want to consider investing in college student rental properties.

Higher Quality Tenants

Nowadays, with college housing becoming very expensive, many of the students come from upper-middle-class families with substantial parental income. In some areas the parents co-sign the lease and guarantee the payments. In my experience, these tenants are better than standard middle-income 3/2 family tenants.

Attractive Properties

One misconception is that students don?t care about the appearance of the property. Nothing could be farther from the truth these days. Many students at higher-end universities grew up at homes with granite counter tops and stainless-steel appliances. So they expect these upgrades because they don?t know anything else. Catering to these tenants with slightly better finishes actually attracts more interest and generates more income.

For example, in one property we owned, we paid an extra $500 for red-stained wood shutters around the front windows. You wouldn?t believe how many calls I received from prospects who said, ?I want to live in the house with the red shutters.?

Also, if you cater to students who want a nicer looking place, they probably will take better care of it than students who don?t care about the appearance and just want a place to party and sleep.

Marketing Ideas

There is one key marketing tip for generating lots of leads from good tenants. I never heard of anyone else mentioning this tip. As the owner, go to the sororities and present your property during their meetings. Typically at the beginning of their weekly meeting they have a few minutes for outside announcements. Just contact their meeting coordinator and get on their schedule.

Summary

These are just a few thoughts on why college student housing may be a good cash flow investment in your area. I could probably write a whole book on investing in college student housing, but that?s for another day!

Source: http://www.accesswealthstrategies.com/1364/buying-real-estate-for-cash-flow-college-student-housing/

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