College Towns: Do It For Real Estate

For those who have not lived in a college town the idea might seem ridiculous. A town filled with tons of boozed up college students catering to their coming of age experience comes to mind. What good could come from the site of the first taste of freedom for a college freshman? With both recent and historically iconic movies like Neighbors and Animal House giving the rest of the world a peek into the lives of college students interest has increased in the real estate they inhabit. This article is for those brave enough to pursue the obscure opportunity presented by college towns.

What Is A College Town?
A college town is the intersection of University life and the economy. The inherent desire to go out drinking is met by the necessity of not only a place to drink. It also calls for money to do so. You might find a large number of twenty year olds filling any entry level job for at least 15 square miles. At the same time, bars offering special deals on game days to ensure that the barstools are packed.

The college town is simple enough. A university creates jobs for professors in the area who bring their families, and draws students from across the country and internationally. Many of these students will need dorms and off campus housing. As a college succeeds, there is a need for expansion which means more buildings and more students. As a college begins to sprawl, the market adapts to its needs. Businesses see these students as potential for increased income so they adapt to attract students. Many of these students fill jobs in the area, thus stimulating the economy and bringing the town full-circle.

What Are The Best College Towns?
The best college towns are Boulder, Colorado, Berkeley, California and Boston, Massachusetts, each acknowledges its identity as a college town and embraces it. They are known for their college students and the lifestyle that is created around them.

Boulder, Colorado
Boulder is a top college town because of components that come from both the college, University of Colorado, Boulder, and the town itself. The University of Colorado Boulder has a football team. It also has off campus housing and a student body heavily involved throughout the community. What Boulder, Colorado supplies is venues, trails, and football stadiums. It also has an active outdoorsy community and many businesses geared toward the college lifestyle. Businesses in college towns are steadily supplied with interns and young employees. Some courses require students to take internships as part of a grade. This often aids start ups and any fields in which courses are offered.

Berkeley, California
Berkeley, California home to UC Berkeley, an iconic university known for its students’ avid involvement in political activism. It also boasts many notable alumni including Steve Wozniak. Berkley’s number of students and their housing needs have begun to affect the housing market in the region. The college’s football team precipitates the need for stadium construction. This affects the local economy, as there is a need for construction, real estate, and service industries to provide food and entertainment to the athletes and fans.

Boston, Massachusetts
Boston, Massachusetts is considered “America’s college town” as it is home to nearly 80 colleges and universities. It may be debatable which college town is the most college town-ish as the criteria are loosely based on the economy created by students who are simultaneously trying to destroy brain cells and earn a degree at the same time. With the large number of colleges though the line between town and college is blurred. Bars and restaurants thrive with equal parts consumers and employees of the service industry.

What Is The Real Estate Market Like For College Towns?
What could the market be like for areas where America’s youth and some international students run rampant? Wouldn’t these students drive down property values and be problematic?

Here’s the short answer, yes and no. Families may not want to live next to groups of college students. However, there is an increased demand due to said students. Each university brings in students from other states and internationally, no college is created without expectations of expansion over time. Colleges appreciate with age. This means each university or college will become more expensive and attract more students, with limited housing this means two things.

One, colleges will have limited housing for students, so many will either need or want to seek off-campus accomodations. Over time this demand increases and the closer a property is to a university the more desirable it becomes to students and thus, the value increases. This effect extends to properties that can be even as far as an hour long commute away.

Two, colleges will seek to expand and build new housing accomodations, this means any property within a couple of blocks away from the institution. To properly invest in real estate in college towns one should keep in mind the concept of growth. Properties near colleges have a steady stream of revenue being produced by students and the potential to be a desired purchase by an institution. Though they may seek the lowest bidder for new properties to build either housing or educational facilities on they will still pay a hefty sum for those properties.

In Numbers
For an idea of what it means to purchase property in a college town here are some numbers provided by Numbeo:

Boulder: Price per Square Feet to Buy Apartment in City Centre- $512.25
Berkeley: Price per Square Feet to Buy Apartment in City Centre- $616.66
Boston: Price per Square Feet to Buy Apartment in City Centre- $977.60
Each price is considerably lower than that of New York’s, the benefit of course being that each price will continue to increase over time. Their value is not so much tied to the general housing market but the continued success of whichever college or university.

Are College Towns Safe?
With the fairly decent dosage of reality many investors might be concerned about the crime and property crime rates in these towns. According to Numbeo, the property crime rates for Boulder and Boston are low. The outlier, surprisingly, is Berkeley with higher crime rates than even New York. It thus would be difficult to attribute crime rates to just the existence of a college alone.

Renting Out Properties In College Towns
By far the most profitable way to invest in real estate in college towns is to rent. Apartments, homes, duplexes, condos, whatever can be purchased and rented. Renting to first time renters as many know can be difficult.

These are younger people who haven’t gone through the process of renting before or even living on their own. College students are known to be unruly and enjoy the more social aspects of life.

With these negatives in mind the most important thing to do is to establish a contract or lease explicitly stating the terms of renting. Possibly even going as far to clarify in person the expectations of the lease as newer renters may not understand how the system works.

Another way to ensure the value of your property is to properly value the deposit. Any college student either knows or will soon learn it is very easy to put a hole in drywall. This is why it’s important to keep records of the specific paint color used and buy spare tile as many factories discontinue tile after a couple of years.

The Risk of Subletting
One of the most important things to explain to a new renter is subletting. Part time jobs do not cover the cost of living and the price of textbooks, giving students an incentive to sublet. This tendency means more tenants will be occupying the same space, which will increase the rental yield. Students eager to save money will gather their closes friends and occupy any given space.

Property management at this point is key, as students might be more keen to simply allowing friends to live in their residence. Not knowing the proper mechanisms, they could organizing their own subletting situation without informing the property owner. This means no increased profit and higher risk for the owner.

An observant landlord will profit, especially if their lease requires a minimum of a year, not a short period of months. Finding renters over the summer in a college town can be more difficult due to when class is in session and even over the winter months. The establishment of a year long lease will ensure that there is very little time spent with an empty property. Which over time no longer makes a profit due to maintenance and marketing.