I live in a college town and own real estate here, but I know many investors shy away from being a landlord to a bunch of rowdy twenty-somethings.
Nowadays I think college towns make more sense than ever for the long term.
Why college towns? Aren't they more expensive? Sure they are. College towns are typically 20% or 30% more expensive than nearby areas.
Wait, you say, don't you run the risk of having your investment property "partied" to death?
Yes, students are notorious party animals.
But as we all know, real estate prices are a function of supply and demand. In college towns supply is usually controlled by strict zoning laws. In my town, for example, a local ordinance prevents more than three unrelated people from living in the same residence.
Enough about supply. What about demand? In college towns demand is usually more steady than the average real estate market.
* Student populations. Most people will agree it takes a college education to succeed in today's economy. More students than ever before are participating in higher education. According to the Department of Education, college enrollments are expected to rise by almost 1.6 million students, or 15%, over the next 10 years. But they aren't building more universities or dorm rooms.
* Graduate students. The number of graduate and professional students is growing even faster -- almost 25%. More of these students are married and desire the stability of a two- to three-year lease commitment.
* Faculty members. While many professors are permanent, many are "visiting" from overseas. Faculty members need housing too.
* Retirement haven. These days, college towns are getting a lot of attention as retirement areas. Active retirees tend to relocate in active college towns. Also, wealthier retirees seek the intellectual stimulation and the clean small-town lifestyle of such communities.
* Industry and research facilities. Many college towns, like Ann Arbor, Mich., Boulder Colo., and Gainesville, Fla., have significant private research and technology industries nearby to attract well-educated employees. This kind of industry tends to strengthen housing demand.
When my son started college, we bought a house he could live in with his friends. All four students paid rent and my son's share was a little less than living in the dormitory. We still own the property and continue to find good tenants. The property doesn't have to be within walking distance of campus - though it helps - as long as it is close to public transportation.
There are dozens - if not hundreds -- of college towns all across the country. Real estate investors should target large attractive university towns with growing student populations and lots of related businesses and industry.
