Janice Lozano
Renting to students can be a profitable endeavour, especially if the property is located near a university campus. However, it also comes with certain risks and challenges. Students often have limited incomes and may struggle to pay rent on time. They may also be inexperienced with basic property upkeep, leading to accelerated wear and tear or hidden maintenance issues that turn into bigger problems. To mitigate these risks, landlords can require a higher security deposit, add specific language to the lease, conduct routine inspections, and include parents as co-signers on the lease to ensure financial responsibility. While charging higher security deposits can protect landlords, it may also be a financial burden for students, who often rely on parental support or loans to cover living expenses.
| Characteristics | Values |
|---|---|
| Rental insurance | Students are encouraged to purchase rental insurance to protect themselves financially in case of theft or property damage. |
| Security deposits | Landlords can require a higher security deposit from students to protect themselves in case of damages. |
| Cosigners | Landlords can require a parent or guardian to sign as a co-signer on the lease agreement, providing more assurance that rent will be paid on time. |
| Screening | Screening students can be challenging due to their lack of rental history and credit history. Landlords can screen co-signers and use tools like Apartments.com to access eviction, credit, and criminal history reports. |
| Lease agreements | Individual lease agreements allow landlords more flexibility in moving residents. Joint lease agreements are preferred by students as they can divide the rent amount as long as the full amount is paid. |
| Rental budget | Students typically have limited income and seek rentals well below city averages. |
| Rental experience | Students are often first-time renters and may be inexperienced with basic property upkeep, reporting maintenance issues, and understanding their rights and responsibilities. |
| Demand | There is consistent demand for rental properties near college campuses, and schools may even affiliate with certain properties, attracting more students. |
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What You'll Learn
Renters requiring students to pay more security deposits
Renting to college students can be a profitable endeavour, especially if the rental property is located in a college town or near a university campus. However, it also comes with certain risks. One way to mitigate these risks is to require a security deposit. A security deposit is a sum of money that a tenant pays to their landlord before or at the start of their lease, which serves as financial protection against excessive wear and tear. While most states require landlords to deposit this money into an interest-bearing bank account, they can charge up to two months' rent for an unfurnished rental property in certain states like California.
For students, the ability to pay a security deposit upfront can be challenging, especially considering that rent is often the most significant expenditure outside of tuition. To address this, some apartments promote zero-security-deposit incentives, which may appear attractive to students who cannot afford the upfront cost. However, in the absence of a security deposit, landlords are not legally obligated to send any final charge statements for up to four years after the end of the lease, and students may be exposed to financial risks without this protection in place.
To balance the needs of both landlords and students, requiring a security deposit that does not exceed one month's rent can be a reasonable approach. This provides financial protection for the landlord while remaining more affordable for students. Additionally, accepting cosigners, such as parents or family members who are often willing to support student renters, can provide further assurance.
To ensure a smooth process, landlords should clearly outline the terms and conditions of the lease, including any circumstances under which deductions may be made from the security deposit. Students, on the other hand, should carefully document the amount of their security deposit, obtain a written receipt, and take "before" and "after" pictures of the premises to support any future claims. By following these steps, renters and students can work together to establish a secure and mutually beneficial rental arrangement.
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Pros and cons of renting to students
Renting to students can be a lucrative option for landlords, especially those with properties near colleges or universities. There is a steady stream of new students each year, so demand for rental properties remains high. Students also tend to be less demanding and are more likely to tolerate minor imperfections. However, they may be less mature and more likely to cause damage to the property.
Pros of Renting to Students
- High demand: There is a constant demand for housing near college campuses, which gives landlords more negotiating power when it comes to rental prices and lease terms.
- Predictable tenancy: College semesters are cyclical, so landlords can generally predict when tenants will move in and out, making it easier to plan for vacancy periods and schedule renovations or maintenance.
- Longer leases: Students typically sign 9- or 12-month leases for the academic year, providing stability for rental income and reducing the need to constantly re-market and fill vacant units.
- Higher rents: Students are often willing to pay slightly higher rents for convenience and amenities like proximity to campus, a short commute, or a furnished unit. Landlords can also charge per room, potentially increasing overall rent.
- Reliable rental payments: Students are generally reliable when it comes to paying rent on time and in full. It is common for parents or student loans to cover rental payments, and parents may even pay a full semester or year upfront.
- Less demanding: Students tend to be less demanding and are more interested in functionality and affordability than premium amenities and space. They may be less likely to complain about small imperfections or minor issues.
- Easier to screen: Students usually have information like GPA and SAT scores readily available, making tenant screening easier than with tenants who have no rental history or employment verification.
- High turnover of tenants: There is a new pool of students searching for accommodation every year, so landlords don't have to worry about long-term vacancies.
Cons of Renting to Students
- Damage and maintenance: Students may lack the experience or maturity to properly maintain the property or handle rental property maintenance issues. They may also be more likely to cause damage, either unintentionally or due to loud parties.
- Short-term tenancy: Students typically rent for a year or less, which can lead to higher turnover rates and the need to repair and clean the property in a short period before new tenants arrive.
- Difficult to screen: Students often have little or no rental or work history, making it harder for landlords to screen them effectively.
- Noise and disruptions: Students may disregard lease terms related to noise constraints and the number of guests, potentially leading to complaints from neighbours or other tenants.
- Vacancies during summer: The demand for student housing may decrease during the summer months when students are on break, resulting in potential vacancies until the new school year begins.
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Student renters' insurance options
Rent is often the most significant expenditure for a student, so it is important to establish a monthly budget that includes rent and utilities. Rental insurance is not a legal requirement, but it is often needed for off-campus housing and can help protect your belongings and liability in case of accidents or damage. Students living off-campus may be covered under their parents' homeowners insurance, but it is important to check the policy to be sure.
If you choose not to carry renters insurance, you may still be covered under your parents' home insurance. Home insurance policies typically extend a sub-limit of the limit for personal property coverage, for instance, 10% or $1,000, whichever is greater, for belongings away at school. However, your parents' homeowners insurance will not cover damage to the building, which falls under the landlord's insurance.
If you decide to take out renters insurance, there are several options available. Companies like AllState, State Farm, and Geico offer renters insurance starting at $10 per month, with coverage of up to $20,000 and a $500 deductible for personal property. Renters insurance may also be added to an existing car insurance policy, depending on the company. When choosing a renters insurance policy, it is important to consider the scope of coverage, including specific risks such as theft, flooding, and natural disasters.
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Rental agreements and lease termination
Rental Agreements
Rental agreements typically refer to short-term rentals, such as month-to-month tenancies. Lease agreements, on the other hand, refer to longer-term or annual contracts. When renting to students, landlords often use individual leasing or "by-the-bedroom" agreements. This means that each roommate is responsible for their own rent and any damage they cause to their room. Roommates are usually jointly responsible for common areas. Individual leases may allow landlords more flexibility in moving residents, even on short notice.
Lease Termination by Tenant
Tenants can terminate a lease early for various reasons, including family violence, military service, or moving out of state. State laws may provide protection for tenants who need to break a lease for specific legal reasons. Most states allow tenants to terminate a month-to-month lease with 30 days' notice. Some leases may require an early termination fee, often equal to one month's rent. It is essential to review the lease agreement and understand the notice requirements.
Lease Termination by Landlord
Landlords may also terminate a lease for various reasons, such as tenant conviction of certain offences, or unpaid rent. Landlords must follow state laws and provide notice of termination to tenants, allowing them time to find new housing. After a lease agreement ends, tenants may continue to pay rent, converting the lease into a month-to-month tenancy in many states.
Security Deposits and Insurance
Security deposits are important for landlords as they cover missed rent payments or property damage. Landlords must return the deposit, minus any deductions, and provide an itemized list of deductions within a specified timeframe. Students should consider purchasing rental insurance to protect their belongings, as the landlord's insurance typically covers only their property.
Construction Delays
When renting a property that is still under construction, students should be cautious. Often, there are no provisions in the contract that release the tenant from the lease if the apartment is not ready on time. Students should carefully review any additional agreements or addendums before signing, as they may inadvertently give up their rights to terminate the lease.
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Screening student renters and their cosigners
Renting to college students can be a profitable venture, especially if the rental property is located near a university campus. However, it is essential to be aware of the associated advantages, disadvantages, and risks. One of the risks is that college students might not have a rental history or a well-established credit history, making it challenging to assess their viability as tenants. This is where the role of cosigners or guarantors becomes crucial.
When screening student renters, it is important to obtain references from teachers, employers, coaches, or previous landlords. These references can provide unbiased assessments of the prospective tenant's character and behaviour in a business relationship. It is also beneficial to conduct a background check, including a credit history review, criminal record check, and verification of employment and residence history.
In most cases, student renters will not have a substantial rental background. Therefore, they should provide the names of cosigners or guarantors who will sign the rental agreement and assume responsibility for rent payments if the student fails to fulfil their obligations. Cosigners are typically parents or family members who agree to be financially accountable for the student's rent and any potential damages.
When screening cosigners, it is essential to verify their creditworthiness and financial stability. This includes conducting credit checks, reviewing their financial history, and assessing their income to ensure they can meet rental obligations if needed. Additionally, cosigners must understand their obligations and sign a cosigner guarantee, committing to provide a full rent guarantee if the student renter defaults.
Some online platforms, such as Apartments.com and TransUnion SmartMove, offer tools to facilitate tenant screening and cosigner verification. These platforms provide access to screening reports for evictions, credit, and criminal history, enabling landlords to make informed decisions.
While accepting a higher security deposit may be tempting, having a cosigner can provide additional assurance and flexibility in renting criteria. A cosigner protects rental income by guaranteeing rent payments and allowing landlords to pursue payment from both the tenant and the cosigner simultaneously. However, it is important to note that a cosigner does not mitigate risks associated with a tenant's personal behaviour.
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Frequently asked questions
No, refusing to rent to students or charging them more would be considered discrimination based on age. However, landlords can require a higher security deposit from students to protect themselves in the event of excessive damage at the end of the lease.
Students are often first-time renters and inexperienced with basic property upkeep, which can lead to negligence and significant damage to the property. They may also not report small maintenance issues that can turn into bigger problems. Additionally, students may be more likely to have parties and a high number of guests, accelerating normal wear and tear.
There is a consistent demand for student housing as long as the school keeps accepting students. Students often have parental support and loans, which can provide more assurance of receiving rental payments on time. Additionally, allowing cosigners and requiring security deposits can help mitigate the risks associated with renting to students.
Landlords should be aware that students may not have rental experience or established financial habits, so screening them can be challenging. It is common for parents or other family members to pay for a student's rent, so accepting cosigners can provide more security. Landlords should also consider including desirable attributes in their property description, such as distance from campus and convenient amenities.
