Your Guide to Investing in Student Housing

Expanding your rental home portfolio requires consideration and strategy beyond just finding a home that is rentable and affordable. Each property is an investment and some locations offer a unique business model that you can benefit from. Affordable housing near any college or university, for example, will immediately become a candidate for student housing, a potentially profitable but more volatile form of property rental.

Student housing is livelier, faster-paced, and more accident-prone than typical investments, but also potentially very rewarding. Let’s dig deeper to find out if student housing is a smart investment for your landlording style.

What It Means to Rent Housing to Students

Students in college and university – and their friends already in the job market – are young. They are often renting a home without parents for the very first time, maybe with a little practice from the dorms. They don’t know how to fix things, many students have not yet learned how to clean, and late rent payments with a fantastic (often real) excuse about exams and all-nighters are par for the course. But if you have a thick skin and a sense of humor, student renters also provide never-ending demand. If the university continues to operate, you will have new students every year and may even develop a waiting list for properties near campus.

Pros and Cons of Student Housing Investment

Pros of Renting to Students

  • Endless demand and wait-listing
  • Chain referrals from good student tenants
  • Reliable rent when paid by parents
  • Low cost-cost amenities chosen for durability
  • Small and unusual properties included
  • Never-ending entertainment value

Let’s take a look at the pros of managing student housing. The biggest benefit is that demand is endless. It’s so endless there are wait-lists for near-campus housing and when students change plans mid-year, another roommate is ready to hot-swap and take over the lease. Students tell their friends about great places and you may even get a chain of good, studious tenants who refer each other to your property each year.

Expect students to be inexperienced at rent payment, but often with parental backup. Some parents will even sign the lease. You can choose between durable, low-cost housing for most students or luxury student housing for parents who insist on sponsoring the best for their collegiates. You can also choose properties that would be less appealing as family homes, like small and strangely designed houses, as students are not picky and often like strange spaces.

As an added bonus, students make entertaining and interesting tenants, so if you don’t mind the antics, you will rarely find student housing to be boring.

Cons of Renting to Students

  • Inexperienced renters
  • Untimely rent payments
  • Increased rate of damage and repairs
  • Increased cleaning requirement during turnover
  • Demand for short-term (semester) rentals
  • Roommate hot-swapping

All the pros aside, student housing is challenging to run. You will need energy – or an energetic team – to keep up with minor repairs like dents in the drywall and loose faucet handles. Expect excessive calls for repairs (and drain clearing) or eerie silence with inexperienced young renters who don’t know when to call for maintenance. You may get lucky with a run of reliable young students or unlucky with a pack of partiers. 

Student housing is most adaptive with 6-month leases and even if you enforce a 1-year lease policy, expect hot-swapping of roommates because students are tied to the semester-based schedule.

Special Legal Considerations for Student Housing

Your city or state may have specific regulations when it comes to renting to students or to residents below 18 or 21 years old. Because students do not yet have their full rights  (ex: to drink, book hotel rooms, or rent cars), and some freshmen are still 17 and legally minors, you will want to write your lease carefully and proceed with caution. In most locations, there are no special rules for renting to students and young adults, but the penalties for renting a hazardous unit may be increased if perceived as taking advantage of inexperienced tenants.

With this in mind, use safety and transparency as your rules of thumb. Write a clear lease and make a habit of going over it with new student tenants regarding both their responsibilities and what they can ask of you – like timely repairs. You will also want to pay special attention to safety and repairs during turnover. If the unit is never empty, be sure to schedule annual or biannual inspection-repair visits.

Choosing the Right Property for Student Housing

What kind of houses can you choose for rental student housing? This is an important consideration. The good news is selection is one of the perks for student housing investment. There are exactly three requirements for student housing:

  1. Near to campus (or the bus route)
  2. Safe and livable
  3. Durability

Location and Livability

Students will live just about anywhere, but it must be close to campus, on the bus route, and decently livable. Performing your legal duties as a landlord will more than fulfill most students’ demand for property quality, but location is key. The closer your properties are to a college campus, the more students will want to live there.

Any House, Any Size, Any Style

Students will stay in small houses, homes with strangely shaped rooms, lofts, attics, basements, and homes with no yard. The usual family-friendly considerations need not apply and most students are especially spry if there is a knee-wracking staircase or even a ladder to the loft. Students expect to live closely packed together, to share multi-bedroom homes as roommates, and to take over buildings by moving in with friends.

Interesting apartments are, in fact, one of the rights-of-passage for young adults renting their first homes. Many want to come away with a few strange tales about the attic apartments and strange campus houses they lived in during their wild college years. Older boarding-house-style homes, which are hard to rent room-by-room to any other demographic, are considered excellent student housing. Apartment buildings and townhouse rows can quickly become overrun with student tenants as roommates and neighbors.

Student Housing Durability

The final deciding factor for student housing investment property is durability. Can the house take an endless stream of energetic, inexperienced tenants who may party, exercise, and do unpredictable school projects on premise? The good news is that if you’re ready for light renovation, most homes have the “bones” to be durable student housing, and just need a fresh coat of gloss (read: washable) paint and new laminate board flooring. Throw in a few heavy couches and bed frames, and you’re student-ready.

Create a Custom Student Lease Agreement

Students are not your typical renters, and leases can be written with any terms that are most convenient to the two parties. Write your lease in a way that helps students become better renters by outlining the rules, using plain language, and providing a few training wheels and safety bumpers in the policies to help them learn without creating conflict or debt.

  • Make it a visual syllabus – easy to read
  • Outline house rules
    • Quiet hours
    • Drain care
    • Trash day
  • Flexible rent payment dates and penalties – training wheels
  • Included utilities or links to utility providers
  • Room for roommates
    • Wait-lists and referrals
    • Hot-swapping leaseholders
    • Guests and long-term guest policies
  • Copies available on request and online

How to Screen Student Tenants

Screening student applicants can be challenging because they do not already have a rental or credit history. Most have just taken their first big financial step in life – by taking out student loans. How do you screen a student tenant with no financial history to show their suitability? It is possible to ask more holistic questions while respecting the fair housing laws about certain personal details.

Ask Student-Housing Questions

  • Do you have roommates ready to move in with you?
  • Do you require roommate match-making?
    • see – your waitlist and other applicants
  • When does your school term begin?
  • Will you be staying through the summer?
  • Do you see yourself in this home for your duration at this school?
  • Do you have pets, or do you plan to get a pet?
  • What are your personal quiet hours for sleep or studying?
  • What is your field of study or chosen degree?

Have Parents Co-Sign the Lease

One of the cleanest solutions is to have a parent co-sign the lease and take responsibility for timely rental payments. From there, you can do the usual tenant screening checks on the parent to confirm sufficient income, a reliable credit score, and a good rental history.

Managing The Revolving Door of Student Housing

Student housing is a profitable and extremely active way to invest in rental homes. students change their housing situations every semester and every summer break. You may have students who stay put for all four years of school and students who only stay for a few months before hot-swapping their lease with another resident.

Fortunately, you don’t have to manage your lively student housing investments solo. With online tools like LandlordStation to streamline your property management and help students keep up with online bill-pay, helpful documents, and maintenance requests, you can simplify the effort of managing student housing.

To discover online property management through LandlordStation, contact us today!

What Landlords Should Know About Subleasing

It is your right and responsibility as the landlord to know about everything that happens to your rental property, especially when a new tenant moves into the building. Ideally, you get to decide who rents your property. However, your tenants can assume this authority through subleasing. This can be good or bad for you and your rental business, depending on how you handle it. 

How Subleasing Works 

Subleasing essentially transfers a lease from the original tenant to another tenant. Clients usually sublease when they have to leave temporarily and are looking to offset the rent until they come back. Many tenants also sublease when moving away permanently before their lease expires with the same goal of saving money. 

Assuming that you don’t have a say in the sublease, the tenant will handle everything with the subtenant and make arrangements for important things such as maintenance and paying rent. However, it is advisable to control the subleasing process and hold both parties responsible for fulfilling the contract’s terms and conditions. 

The Pros & Cons of Subleasing 

Subleasing has good and bad implications for all parties involved, especially you, considering your stake in the property. Here is an overview of the advantages and disadvantages to you. 

Pros 

Here is an overview of the pros of subleasing, assuming that you are in control of the process: 

  • Qualified Tenants 

The landlord’s biggest concern about subleasing is that the tenant will give the property to a problematic subtenant. However, you can ensure that the subtenant meets your standards by taking part in the vetting process. 

Ideally, the subtenant should undergo the same screening process as other tenants. It is also advisable to delegate the tenant screening process to a screening agency to ensure that you don’t miss any red flags about the subtenant. 

  • Steady Rental Income 

In most cases, the tenant would have to cancel the lease agreement if they had to move, and subleasing wasn’t an option. This would leave the unit empty, resulting in lost income until another tenant comes along. You would also incur expensive tenant turnover costs when looking for another tenant. 

However, agreeing to sublease will ensure continuity in the rental income from that unit. It will also save you hundreds or thousands of dollars in tenant turnover costs. 

  • Positive Long-Term Relationships 

Some tenants sublease with the intention of coming back. Good tenants are difficult to find, and subleasing to a qualified subtenant for several months would be a small price to pay (if it is a price at all) to retain a good tenant

Cons 

As explained earlier, every landlord’s biggest concern about subleasing is that the subtenant will be problematic. Unfortunately, the tenant handling the subleasing process may not know how to screen subtenants according to your standards. A problematic tenant poses other threats, including property damage and lease violations. This is why it is important to either restrict subleasing in totality or get involved in the process. 

What to Do about an Unauthorized Sublease 

It is always advisable to cover everything in the rental contract, including whether or not tenants can sublease their units. You also have the right to cancel a tenant’s lease if they sublease their unit without your authorization. Ultimately, it is advisable to consult your lawyer and act within the law when handling such a case to avoid violating the tenants’ rights. 

Conclusion 

You never have to worry about subleasing if the subtenant meets your standards and passes the tenant screening test. LandlordStation can help you conduct thorough checks on your tenants and subtenants. Get in touch today to learn more about our tenant screening solutions. 

The New Landlord Primer

You’re all smiles as you plan to dip your toes into the lucrative real estate industry. Or maybe you’ve already built a property ready to usher in your first tenants.

Either way, as a first-time landlord, the things to do can quickly overwhelm you.

Don’t worry- we are here to hold your hands as you take those baby steps. Here are some of the things to tick off your checklist:

1. Take Cover- Obtain a Landlord Insurance

Before opening your property’s doors to tenants, ensure you’ve purchased landlord insurance. You don’t want to suffer from common issues when renters occupy your property.

You can choose from three types of landlord insurance policies:

DP-1 policy

It’s the least expensive and covers only stated risks. These perils can include:

  • Riots
  • Fire and smoke
  • Windstorms, hail, and lightning
  • Vehicle-caused damages
  • Explosions

But you’re not guaranteed compensation for damages from any of those issues.

DP-2 policy

A DP-2 protects you from more types of risks. The policy explicitly names covered risks, just like DP-1 policies. 

Apart from covering what a typical DP-1 does, DP-2 policy may also include:

  • Frozen pipe and electrical damage
  • Falling objects
  • Damage resulting from ice and snow weight
  • Flooding 
  • Building collapse

DP-3 policy

This policy is an open peril cover that lists any specific risk not included in the above coverages.

2. Compile a Thorough Lease

The lease agreement is a binding contract that stipulates what you and the renters can and cannot do. The document also explains the steps to take if any party breaks the agreement.

Remember to cover all bases when writing a lease. Sure, a two-page document may cut it for some time. But what if something that wasn’t covered adequately in the document crops up? 

Ensure you’ve included and described these items to safeguard your interest while adhering to legal obligations:

  • Length of lease and provisions for automatic renewal
  • Name and status of every person that will be residing on your property
  • The period allowed for tenant’s “guests” to occupy the property 
  • Rent, when its due, and penalties for late payments
  • General deposits and security deposits plus circumstances that will cause you to hold the deposit
  • The party responsible for utility bills
  • Rules regarding pests
  • Property maintenance
  • Insurance

The exact clauses, terms, and language may vary with states, so do your homework perfectly.

3. Befriend the Laws

You want to remain on the safe side of the law. After all, who wants to contend with lawsuits that can tarnish their images and waste resources?

The trick is to know and adhere to all fair-housing acts. This law protects tenants against discriminatory practices in housing based on seven factors:

  • Sex
  • Color
  • Disability
  • National origin
  • Familial status
  • Race
  • Religion

The Department of Housing and Urban Development (HUD) is responsible for enforcing this act. 

Here’s a well-kept secret: A person from HUD can pose as a renter on your property to see if you follow their act. Don’t let them trap you.

Also, if a renter feels like you’ve discriminated against them, they can file a claim with HUD. The department will then conduct investigations to get to the bottom of the matter. 

To avoid such accusations and comply with the fair housing act, assume every potential tenant works for HUD or is attempting to accuse you of breaking the laws. 

  • Treat every tenant with dignity and respect
  • Screen tenants consistently and employ a uniform qualifying standard- request the same documents, fees, and details
  • Check your federal, state and local fair housing laws to ensure you aren’t missing any mark. Be sure to stay abreast with all laws by researching in the right places for updates

4. Screen Tenants and Their “Guests”

Although we mentioned this point above, it needs its own section. Yes, it’s that important. 

Your renter might be a nice person who lets family and friends couch-surf while they look for their places. Or, due to a whirlwind of romance, their significant other might overstay at your property. Whatever the situation, complications may arise in the long run.

On the surface, unscreened guests staying beyond the reasonable time frame might not be the biggest deal. But here are some of the dangers they pose:

  • Unknown Background: Screening helps uncover every occupant’s criminal and credit background. You want to ensure no one turns your property into a launch-pad of criminal activities. 
  • No security investment in the property: Unscreened guests don’t have a monetary investment that incentivizes them to maintain and clean the property. 
  • No consequence for disruptive activities: The unscreened occupants also aren’t the ones who stand to lose their space when they argue, play loud music, or ignore complaints from neighbors.

Let’s face it- it’s difficult to stop tenants from hosting unscreened occupants. Your best bet is to limit how long these guests can stay. Remember to include this policy in your lease to make enforcement a breeze. 

5. Property Management Vs. Self-Management

Choosing between hiring a property manager and self-managing isn’t as easy as it sounds. A novice in the industry may view their property as a simple equation of rental revenue – (costs + mortgages) = profit.

But that’s just a basic mantra. It’s also recommendable to account for landlord duties, time, and energy. The duties include:

  • Maintenance
  • Addressing vacancies
  • Dealing with tenant relations
  • Rent collections
  • Lease enforcement
  • Other duties – Think taxes, tenant turnover, evictions, insurance, rental law enforcement, inspections, and adjusting the rent. 

Managing all these duties can be a stressful 24/7 job. But with a platform like LandlordStation, your task becomes painless. Our one-stop solution will cover everything from tenant screening to document management and online rent payments to renters insurance.

Hiring property managers come with perks of benefits. These professionals make it their duty to understand the rental industry’s fair housing laws and best practices. 

Property managers also enjoy powerful links in the industry, thanks to professional groups and associations. So staying abreast with changes in rental laws is painless.

However, these professionals typically charge 7-10% of monthly rental income to handle all the above duties and issues. For instance, the monthly fee may be $100 for a property whose rental income is $10,000. Plus, getting a trustworthy manager can be challenging.

6. Require Renters Insurance

We see you asking, “But I have my property insurance.” That’s great. 

However, a smart landlord requires all tenants to have their own insurance policy. These policies protect you against extra liabilities.

While your homeowner insurance covers the actual structure and dwelling, the renters’ insurance protects the tenants and their property from losses.

For instance, your landlord insurance policy will cover building damages caused by a burst pipe, fire, or electrical issue. But what if the fire, water leak, or power surge destroy your tenant’s personal belongings? That’s where the renters’ insurance policy comes in.

Most renters’ insurance policies also include additional living costs incurred from insured misfortunes. Consider a situation where you need more time fixing that pipe, repairing drywall, and replacing the flooring. Such a situation can force the tenant to look for a temporal place, for example, in a hotel. Fortunately, their renters’ insurance policy may pay for extra expenses above their normal living costs.  

7. Get Loan To Purchase Your Property

Looking to finance your dream but don’t have ready cash? A loan may come through for you.

But while loans for rental property share some similarities with mortgages for residences, there exist significant differences. Be sure to do your homework and research the rental loan requirements, including:

  • Credit scores: Ensure your credit score is attractive. Sure, Fannie Mae can give up to 10 loans. But the more the loans, the more the potential risks, leading to increased credit score requirements.
  • Cash reserves: Lenders want to ensure they can get back their money and interest even if the first six or so months don’t see tenants on your property.
  • Higher down-payment and income: You may have to put down at least 20%. Also, most investment loans tend to have more stringent limits on loan to value (70-80% LTV). And your W-2s or tax returns must show stable income. 
  • Find the right lender: Be sure the lender has experience handling loans for investors and landlords. You don’t want unnecessary delays or loss of your desired property. 
  • Rent loss insurance: If an unfortunate event leads to damaged property and loss of rental income, this policy will protect you. It’s usually included in your property insurance coverage.

You’ll choose between two types of loans depending on the number of units in your property:

  1. Residential loan: It’s suitable for properties with four units or less. This loan is more or less like the traditional mortgages but comes with more stringent requirements. 
  2. Commercial loans: It’s designed for properties with five units or more. While the requirements are more stringent than residential mortgages, you can use them to finance any business (not just residential property). 

Wrap Up

Being a landlord can be a rewarding investment. And with the right strategies plus tools of work, your property management duties will be painless and you’ll be on your way!

Landlord’s Guide to Security Deposits: What You Need to Know

When you rent out your home to someone, they will often pay a security deposit. Security deposits are a necessary part of renting out property. They are designed to protect landlords from damages that may occur. But what are the limits? Your landlord’s guide to security deposits will teach you what to do in these situations and more. Read on for everything you need to know about security deposits!

What is a Security Deposit?

A security deposit is a sum of money that tenants pay to the landlord upon moving in. If all goes well, it can be returned at the end of the tenancy. Security deposits are used as a way for landlords to protect themselves from damages or, in some states, unpaid rent. A solid tenant screening process will do a lot to protect your investment, but it can’t predict everything. A single missed paycheck can result in unpaid rent or damage could occur beyond normal wear and tear. Not being prepared for it can prove costly! It’s better to have something secured than nothing at all!

The Tenant’s Responsibilities

Tenants have responsibilities when it comes to renting property. They must pay rent on time and maintain the property. If they don’t take care of the property or pay their rent, the landlord can do certain things to make sure they get your money back. For example, if the tenant doesn’t take care of the property or pay the rent (in some states), you can:

  • Take legal action against the tenant
  • Put their name on a credit bureau list
  • Keep their security deposit

If your tenant breaks any agreement with you, you are allowed to do any or all of these things. 

What To Do If a Tenant Breaks Your Rules

We all know that when renting out a property, you need to prepare for the worst. If your tenant breaks your rules, there are a few steps you can take in order to protect yourself and your home.

If your tenant damages something like the dishwasher or bathroom, it’s important to keep detailed records of what was damaged and how much it cost to replace. This will help you if it comes time to evict the tenant. This also helps with backing up your decision to withhold part or all of the security deposit as a result of the damage the tenant caused.

If a tenant becomes problematic enough to warrant eviction, you’ll want to consult with an attorney to find out what steps you need to take to evict them legally and as quickly as possible. If you skip any steps or don’t handle the eviction completely legally, you can give the tenant the ability to stay longer and cost you more money.

What To Do If the Tenant Damages Your Property

The tenant will often be liable for any damages to the property – unless they have renter’s insurance. This is why it is important to make sure your security deposit covers the cost of these damages. Of course, it’s not always easy to predict if damage will occur or how much it will cost to repair. That’s why you need to take these precautions before renting out your property:

  • Make an agreement with the tenant about cleaning up after themselves and the process for any repairs that are needed
  • Take photos of everything before they move in and agree on what needs to be fixed before they move in
  • Get a signed agreement/contract with the tenant that states exactly what furniture, appliances, and other items are included in the rental agreement and what condition they are in – this will eliminate confusion over wear and tear or damage caused by tenants later down the road

Once you do these things, you should be in a position to easily determine whether the tenant gets their security deposit back and if they cause damage, how much of the security deposit to withhold for repairs.

When the tenant leaves, you should also take these steps:

  • Do a walk-through with the tenant to assess the status of the rental property
  • Take photos of everything and document specific instances of damage
  • Provide tenant with a detailed list of the damage caused and what it will cost to repair

When you take these steps, you ensure that the tenant understands why you are withholding part or all of their security deposit, if necessary. You also provide them with documentation in the event that they try to sue you for the security deposit, setting yourself up for a stronger court case.

How To Calculate A Security Deposit

A security deposit is often a certain number of months’ rent – typically one or two months. But how much you can charge is based on where you live. You need to familiarize yourself with the laws in your area. You’ll also need to look at the market itself. If other landlords are charging just one months’ rent, it’s going to be difficult for you to charge two or three months’ and find tenants. 

Security deposits are a landlord’s best friend. A security deposit is a small amount of money that a tenant pays to the landlord, in addition to monthly rent, in order to use the property as their home. The deposit is used to cover any damages that the tenant may cause to the property, or if they stop paying rent, which means the landlord won’t have to go through any legal proceedings to get their money back. It’s important that you know your rights and responsibilities as a landlord so you can avoid any conflicts and go about your business as usual.