Have you ever thought about getting into real estate for passive income? What type of property would you like to own? A house, duplex, quadplex, or maybe even an eight-plex? And, who would you market your investment to? These are all very basic questions that you should know the answer to long before selecting your property.
My wife and I have kicked around the idea of owning some rental properties. After much discussion, I think we are pretty open to the type of property, but our target market is for certain: college students.
Why in the World Would We Target Students?
College students are typically thought of as irresponsible, reckless, and nowhere close to dependable, so why would my wife and I decide to focus on this group to rent our investment properties to? Most people would assume that students would tear apart their beloved property and that the investors would certainly lose money because of the damages. This may be true in some cases, but based on our research, student housing is a very lucrative business for quite a variety of reasons.
Benefits of Renting to College Students
- Greater Chance of Payment – I know, you probably think I’m crazy, but I’m dead serious! College students often receive government or private loans that help them pay for schooling and housing. When the institution receives the loan, they deduct the amount that’s needed for the tuition and then provide the remaining balance to the student in a check! The student does absolutely no work, but presto, they have your rent check in hand!
- High Demand = High Rent – Rentals that are within a walking distance to the college are in high-demand for students. Since they are highly coveted, you can charge much more per month than a similar property that a few blocks further away from campus.
- Long (ish) Term Rentals – college students typically hunt for off-campus housing after their first year of college. This means that they’d like to find a place to rent for the next 3 or 4 years! In terms of the rental world, this is a pretty long-term tenent.
Crunching the Numbers – Is the Student Housing Worth It?
Around my neck of the woods (with incredibly cheap real estate), a house that’s blocks away from the local college can be found for about $100,000. That same house can be rented for about $750 a month. At this rate, it would take about 11 years to recoup your investment.
Yes, eleven years is a long time, but deals can be found out there. A home in foreclosure could be swept up in the same area for about $70,000, but you have to learn to look in the right places and to act fast. With a $70,000 investment, suddenly your $750 a month rent check could pay for your house in less than 8 years, which is certainly worth your time.
Have you ever considered renting real estate to students? What do you think of the idea now?