Welcome to Part 2 of “Making More Money,” our series on how property managers can earn more from their properties. We started the series with a focus on boosting revenues by making buildings pet-friendly. This week, we’ll cover renting to students and other types of less-typical tenants. Make sure to research your market before following the advice in this post.
Depending on who you talk to, renting to students is either a brilliant idea or an enormous risk. Some students, particularly undergraduates, have a reputation for being less than respectful to property they don’t own.
Boston property manager Tami Hunt once worked for a company that specialized in student rentals. “Often, after move out, we’d find that the students had damaged the apartment,” she says. And while the security deposit often covered the cost of repair, in some cases it took up to a couple of weeks to complete the work, which resulted in loss of rent.
If you’re in a college city or town, students make up a significant part of the renting population, so appealing to them is key. But what do you stand to gain by renting apartments to students?
The Benefits of Renting to Students
Renting to students can deliver two major benefits unavailable to property owners and managers in non-college towns.
#1: Keep Your Units Full Year-Round
Of course, every college city or town is different, so again, do your due diligence. Every fall a new academic year begins, which means an influx of new renters. Some students will try to negotiate a lease only covers the nine months of the academic year, but insist on a 12-month lease.
Jenn Lampa, property manager with Isalia Property Group in Boston, says, “Most students tend to stay at one university for four years, so they also tend to stay in the same apartment, leading to less turnover for us.”
#2: Charge Higher Rents Where Student Housing is in High Demand
In cities and towns where space is limited, colleges and universities may be unable to build additional dormitories, which is a boon for the student rental market. Afraid that $1,800 per month is too much to charge? Most students have roommates, so if three sign the lease at $600 per month, the blow is softened for whoever foots the bill, usually the parents. (In some cases, the rent may be lower than what the college charges for a dorm room.)
Getting Started: 3 Tips for Renting to Students
One of the best parts of renting to students is that it usually doesn’t require a lot of time or capital investment. Instead, you may just have to change your policies and how you market your units.
#1: Create Airtight Leases
Often undergrads will try to sublet the property for the months they’re not in school, typically the summer, which means you could wind up with unwanted tenants. If this will make you lose sleep, make sure to prohibit subletting in the lease. Also, don’t forget to have your attorney review your leases annually.
#2: Require Students’ Parents to Sign a Guaranty
Whether students will pay rent on time is always a concern. But there’s an easy way to mitigate this potential problem. When signing the lease, have each student’s parents sign a guaranty, which is similar to co-signing a loan. Should students spend their rent money on food, drink, or spring break, their parents will still be responsible for paying you.
Hunt says that it’s best that the lease guarantors are residents of the United States, preferably in the same state where the lease is in effect.
#3: Make Your Rentals Durable
This means installing resilient materials, such as wall-to-wall carpeting or tile instead of exposing hardwood floors, which can be damaged easily by less careful tenants, says David Last, a property manager and the principal at Last2Development. Keep in mind that durable doesn’t necessarily mean cheap. Inexpensive, low-quality carpeting and padding will wear out quickly, and replacing them will take additional money and time, which can mean lost rent.
Pro-Tip: Rent to Other “Non-Traditional” Tenants
One enterprising landlord in Boston keeps a unit rented consistently by leasing it to federal law enforcement agents who do year-long rotations in the regional office. Here are a few other groups to consider renting to:
Visiting Professors or Medical Professionals
If you’re in a college town, students aren’t your only option. Consider furnishing units and renting them to visiting professors. In an area with lots of hospitals, especially teaching institutions, rent to visiting doctors and instructors, who typically look for a lease of at least one year.
Military Personnel and Families
In cities or towns with a military base, many owners make a nice living by renting property to enlisted men and women and officers who prefer to live in a real neighborhood.
Corporations
Some properties can be transformed into “corporate apartments” that companies lease for their employees or consultants on mostly short but sometimes longer terms. These units can command higher rents because they’re furnished like a hotel, with bedsheets, dishes, an ironing board, and so on. Time and cost are involved in the initial set up of these apartments, but the reward is much higher rent. As always, do the proper research first to see what the market will bear.
Read more on Resident Management