OfflineI live in a college town, we have one university and one college in the city itself with three satellite colleges within 30 minutes of the city. Many local investors that I have talked with steer clear of student rentals because they are afraid that students will ruin their investment property but surprisingly, they don’t.
My son owns a student rental here and I think the key to keeping your student rentals from becoming the trashed party houses like the one in “Animal House” is in the lease.
It is because the lease includes language to address Joint and Several Liability which I can explain best by giving you this example:
Even if each student was paying $500.00 per month, each person is still liable for the full amount of rent. So, technically they are responsible for the $2000.00 per month. More importantly, he has additional co-signers aka “parents” that signed the lease as well.
Now let's say a roommate’s parent loses their job, and they suddenly can't pay their portion of the rent for student housing. The other parents aren’t going to let this ruin their credit, so your rent still gets paid.
You see, the clause for Joint and Several Liability actually serves as monitoring or policing mechanism and by having them all sign it actually helps in the collection of rent. Essentially, should a situation arise where for whatever reason the rent wasn’t paid an e-mail is simply sent to everyone that includes the co-signers stating that the rent hasn’t been paid. Now there is no need to target one person for his/her share. It is more like a reminder saying “Make sure you get this rent paid.”
My son keeps a nice, clean student rental and believe it or not at the end of the year it is still in the same shape as when it was first leased. Even for those students who like to party. Yes, there is the usual painting but that is standard.
Hope this frees up any worry some of you may have about student rentals. They really are a great investment opportunity and command a lot more rent than if you were to rent out as a SFD.
By the way, using Joint and Several liability language in your leases works well with duplexes too however, each unit in the duplex would have its own lease pertaining to that half of the unit if it was rented out to more than one family or person.
I like what Lisa said about not being afraid to rent to students. I think there are plenty of students who are serious about an education and won't trash your rental. Having clear rules in the lease and having the ability to evict those that do not comply is important. Also recieving rent per bedroom is a very profitable senario, because you can get more rent than you might be able to get by just renting the whole house to one family. The problem with putting a clause in the lease agreement that says everyone is responsible for everyone else's rent if they don't pay it, is that in most cases the students don't necessarily know their roomates. Every party is contacting the management company and renting individually. I would never sign a lease document with a clause like that for my children going to college. I am not about to sign responsibility to make up rent for the other leasees when I don't even know them. I don't know of any places here on our college campuses that work that way. But, it's a great idea if you can get people to go along with it. You better make sure it is in bold print and verbally explained to be enforceable in court. It is not common practice.
Hi coach,
I agree with you on not wanting to sign an agreement myself for my college age children but ti is being done a lot here in my town. When the student applies for the room he/she is given the contract and we ask for a co-signer. This is of course usually the parent. We (my son) have clearly explained to the parents what this lease means. We have only ever had one parent walk away from it only to come back later and say they would agree. Unfortunately for them the room was already rented.
There are other scenarios that can be written into contracts and of course as long as all parties are agreeable and understand what is being required of them then all systems are go.
Whether it is students or regular rentals the contract needs to be clear and understood by all parties.
The main point of sharing this is to let people know that there is really nothing (as long as it is legal) that can't be written into a contract. There can be room for negotiation.
Best of luck everyone!
Lisa