Those in the market for commercial investing opportunities have likely come across rental properties in university and college neighborhoods. These properties tend to be highly desired, as they can be quite lucrative commercial investing ventures.
There are definite pluses and minuses to commercial property investing in college rentals. While the positives usually outweigh the negatives, it is important that buyers understand both sides of this investment coin before purchasing such properties.
Why College Rentals Are Great Commercial Investments
When considering the goals of commercial investing and how they can be accomplished, it is easy to see why purchasing rental properties in university towns can be great commercial investing opportunities because of:
- High Demand - Rentals in college neighborhoods close to school campuses are in high demand among students seeking places to live close to campus. The closer property is to the campus and local amenities such as food, public transport, and local entertainment, the higher is its demand with renters who walk or bike to class and need something close. High demand frequently means few or no vacancies during the school year.
- Strong Rental Income - Even in areas where other types of rentals are generating lower rents, college rentals continue to bring in higher rents month after month. Commercial property investing in these types of rentals can be a wise move since the income is very stable due to low vacancies.
- Continuous Flow of Tenants - Due to the high demand of rentals in college towns, there is rarely a shortage of tenants looking for them. Therefore, property owners have a larger pool of tenants to choose from when renting and there are more renters looking whenever a current tenant leaves.
Potential Negatives for Investing in University Town Rentals
- High Tenant Turnover - While there is always a strong market for rentals in college towns, most are short-term arrangements. Tenants typically want to sign shorter leases when they stay during the school year only. Even though there are plenty of new tenants ready to move in, owners must continuously go through the rental process with each new tenant.
- Off-Season Vacancies - Since most students go home for the summer, many college rental properties sit vacant for a few months until school starts again. During this time, properties are not producing income unless full or multi-year leases are signed with students who wish to stay at the property. In this type of circumstance, they are responsible for paying the rent year-round to maintain the rental contract.
- Properties Require Continuous Attention - In addition to the time and effort involved with a higher tenant turnover, commercial property investing in college rentals takes more hands-on time to deal with maintenance, property damage, noise issues, roommate problems, and other concerns. University town rentals are definitely not passive investments.
High demand, low vacancies, and a near-continuous flow of income make university rentals strong commercial investing opportunities. Yet commercial investing in such properties does require more owner attention as well as the ability to be profitable despite the possibility of a few non-producing income months. As long as those considering commercial property investing in college rentals understand the few negatives and can work around them, they can usually expect to do quite well!