While the real estate industry has unquestionably suffered throughout the last few years, pockets of success can still be found throughout the industry. One area where there are currently opportunities are in college towns, where there is plenty of opportunity to buy inexpensively – and plenty of tenants looking for rental housing.

In some areas, real estate prices have dropped by 50%, and mortgage rates are at rock bottom, making it an excellent time to invest in rental properties. At the same time, hundreds of thousands of Americans have gone back to school, as an alternative to trying to find a job in the current job market. The leap in college freshman admissions alone from 2007 to 2008 was 144,000, the biggest jump in over 40 years, and that says nothing of the people who are returning to finish their degrees, or going back for higher degrees. This surge in students means a shortage in student housing, and a lot of students desperate to sign a new set of rental agreement forms.

Real estate development has been relatively quiet, meaning that most areas aren’t adding new supply to the market any time soon, in large part due to the high foreclosure rate. Independent mom-and-pop landlords looking to get into the rental agreement game have a rare opportunity to buy in inexpensively, and actually make a decent profit off of their rental agreement forms, without being squeezed out by the large development firms.

There is one major drawback worth mentioning, in regards to college rental housing: upkeep and repairs.

College students are notorious for being both demanding about rental standards, and devastating to the property at the same time. They will call up and complain about the shower pressure not being up to their expectations, and later that night invite 100 of their closest friends over for keg stands and Jello shooters.

There are several ways a landlord can address the damage issue. One is to require the maximum allowable security deposit, so that when the tenants vacate, the landlord can hopefully cover the repair costs with the security deposit.

Another recourse is to require co-signors, such as parents, to go on the hook on the rental agreement forms, since parents are far easier to collect rent from than insolvent students. Most students haven’t had the time to establish credit yet, making a landlord credit check on them next to useless. Their parents, on the other hand, should have a long and telling credit history, which makes them a far more accurate indicator when you run a landlord credit check.

Then there are the strange, but necessary, clauses that should be included in student-housing rental agreement forms, such as clauses prohibiting paint ball and pellet gun use on the leased premises, and prohibiting anyone from going up on the roof. It’s a wise landlord who prohibits grill use as well – ever took the time to imagine 20 drunk college guys trying to grill on the porch at 2 AM?

In addition, student tenants turn over every year, and signing a new batch of rental agreement forms is the most expensive part of being a landlord, with the combination of advertising costs, vacancy costs, etc.

For all the drawbacks of signing rental agreement forms with college students, the supply and demand equation is certainly tempting. Most landlords with student tenants are well advised, however, to hire a property management firm to take over the day to day property management and run the occasional landlord credit check, as a way of outsourcing the worst of the student housing-related headaches.

Author Bio: Brian is a landlord who follows and analyzes real estate market trends, and manages content for EZ Landlord Forms, a supplier of rental agreement forms, landlord resources, and landlord credit check and tenant screening reports.

Category: Real Estate
Keywords: college town, student housing, rental agreement, lease, lease agreement, real estate investing