Investing in College Town Real Estate: Opportunities and Challenges

College towns are an often-overlooked real estate niche with strong investment potential. For too long, investors have shrugged them off as only being suitable for student housing. College towns can represent an opportunity for investors focusing on generating long-term rental income. What makes college towns attractive is that they have consistent demand with off-campus housing being attractive for students, faculty, and recent graduates. 

While every college town has its own personality, they all present the same opportunity. Properties near campus—especially within walking distance or with easy transit access—remain in high demand among students, faculty, and staff.

Before you jump into buying a property in a college town, you’ll want to consider the unique challenges involved. These properties are an ideal way to diversify your portfolio and generate passive income with lower vacancy rates. We’re exploring everything you need to know about the opportunities and challenges of investing in college town real estate. 

Why Invest in College Town Real Estate?

College towns aren’t just full of students. They have year-round demand from faculty, staff, and other professionals. Many college towns are often home to major companies with offices close to the college campuses to attract post-graduates, many of whom may want to stay in the area long-term. 

Even during times of inflation, college towns can support a diverse range of businesses, from nightlife to independent restaurants and cultural sites. Unlike other areas, college towns essentially market themselves with a steady stream of young people moving into the area. 

College towns consistently attract students, faculty, and relocating professionals, ensuring a steady demand for housing. The rotating cycle of new students, including on a termly basis, means that vacancy rates are typically lower as there is constant demand.

College towns present opportunities to generate stable rental income with long-term tenants, including students who may choose to remain in the same property throughout their degree. While students may not appear to be the most attractive tenants, most student properties have multiple occupants, allowing you to generate a higher-than-average rental yield. 

Investing in a college town can help shield your portfolio from market downturns, as demand for student and faculty housing remains resilient even during economic uncertainty. Even when the economy fluctuates, you’ll still benefit from the high demand of a college town. You’ll be able to raise your rental costs without facing potential vacancies as there is sufficient demand to facilitate price increases. 

In a Snapshot: Should You Invest in College Towns?

Although college towns typically have a quick turnover and are impacted by seasonal breaks, they typically have consistently low vacancy rates. College towns are also experiencing growth with research medical centers and tech hubs being formed around college campuses, introducing other potential tenants to the area. 

College towns represent an opportunity to generate reliable rental income and are an ideal way to diversify your portfolio to improve its resilience to market instability. 

What to Consider When Investing in College Towns

Not all college towns offer the same investment potential. You’ll want to do your research and choose a college town with properties that suit your investment portfolio. Remote college towns often have lower property costs, while those near major cities may offer stronger long-term appreciation. Working with an investor-focused agent within college towns can help you identify potential investment opportunities and navigate the local market. 

Here are 4 things to consider when choosing which college towns to invest in:

1. University Size and Stability

Look for college towns with reputable, growing universities, as increasing enrollment drives long-term housing demand. It’s important to consider the financial stability of private universities, as your property investment may not be so attractive if the university were to close soon. If the college decides to close or relocate, it could have major consequences for the local housing market, leading to high vacancy rates and negatively impacting property values. 

2. Location and Infrastructure

How close is the property to the college campus, amenities, and transportation? Properties within walking distance of campus or close to public transport will be more desirable, allowing you to charge a higher rental fee. When you’re comparing different college towns, judge them on their infrastructure quality, including utilities, roads, and public transportation, as this may impact whether students choose to live there after graduating. 

3. Local Economy and Employment Trends

Most colleges will play a major role in their town’s local economy, supporting small businesses and generating footfall. Look for college towns seeing a growth in local employment opportunities from the college itself and research-based industries, such as tech and healthcare. These college towns will usually be considered up-and-coming, making them attractive to working professionals as well as students. 

4. Seasonality of Demand

Seasonal demand is something that makes college towns unique. While some students and faculty members may choose to have their rental contract throughout the year, rent typically fluctuates during summer months and school breaks. ]

When you’re researching a college town, you’ll typically see neighborhoods that represent student-only rental markets, where contracts are usually offered for the academic year. By comparison, other neighborhoods may typically have year-round contracts. 

You may still be able to do a short-term rent for your property during the summer months as most colleges offer summer schools and other programs that students will require accommodation for. 

Types of Properties Appropriate for Investing in College Town Real Estate

What type of properties should you focus on buying if you’re investing in college towns? Most investors will prioritize rental properties. The luxury student housing industry is still in its infancy, but it’s a possible option for colleges that attract international students who are willing to pay a higher accommodation cost for amenities. 

Duplexes and multi-family units allow landlords to rent out to multiple students at a time, increasing their rental revenue for a better return. 

Single-family homes are often repurposed specifically to be turned into student housing, usually converting a living room or at-home office into an additional bedroom. These homes are attractive to students as they are more affordable than a studio if they can find roommates or other students to rent with. Family homes are also an ideal investment in college towns as you can easily sell them if you decide to change your portfolio. 

Challenges of Investing in College Town Real Estate

Investing in college towns isn’t without its challenges – especially if you’re a relatively new investor. Even if you have multiple properties in your portfolio, college towns can present unique challenges due to fluctuating demand, tenant turnover, and property management needs. 

You’ll want to consider these challenges before investing in a college town and account for them in your real estate strategy. Here are 5 challenges you’ll face when investing in real estate in college towns:

1. Fluctuating and Seasonal Demand

Vacancy periods can significantly impact cash flow, making it essential to plan for seasonal demand shifts. It’s normal in college towns to see seasonal demand, reflecting the cycle of the academic year, with more vacancies during the off-season. These fluctuations happen for staff, faculty, and student tenants. You’ll want to account for the off-season in your cash flow balance or find ways to repurpose your property in the off-season, such as listing it on Airbnb. Make sure to check any local regulations or consider using the summer months to do DIY repairs or renovations to your property.

2. High Tenant Turnover

College towns by their nature have a higher tenant turnover rate than other areas. Although there are always new students coming into college towns, you can expect to have a new tenant at least every few years. It’s common for students to change their accommodation annually, though you may get lucky with a long-term tenant. 

However, most degrees only last four years, and students will eventually move on. You’ll need to be prepared to go through the advertising and tenant approval process on a more regular basis. 

3. Property Management

Your nearest college town might be hundreds of miles away. It’s not unusual for real estate investors to focus on areas outside of their state or district. Remote property management can be challenging, making it worthwhile to hire a local property manager in college towns. Most investors will choose to work with a property management service to oversee tenant relations and maintenance. 

Student housing typically experiences more wear and tear than other properties, as they don’t undergo the same amount of cleaning or maintenance from the tenants. Most of your tenants are likely to be living away from home for the first time, so they may report maintenance issues more often than other tenants. 

4. Regulatory Challenges

Student housing and short-term rentals are increasingly becoming the targets of rent control, local regulations, and zoning laws. If you’re investing in a college town that you’re not familiar with, it’s a good idea to work with a real estate agent or another investor who can bring you up to speed with the local regulatory situation. 

5. Potential Market Saturation

There are only so many students, faculty, and staff that need accommodation. It’s not uncommon for college towns to face market saturation, especially if investors have flocked into the area. Competition from other landlords and newer developments may lead to vacancies or result in lower rental prices to attract tenants. 

How to Be Successful at Investing in College Town Real Estate

When you’re investing in a college town, you’ll want to follow the same best practices as any other location. While we’ll review these again below, it’s important to consider ways to address the unique challenges of the real estate market in college towns. 

Being proactive can streamline your investment strategy and reduce potential headaches, like high tenant turnover and vacancy rates. Here are 5 things to do to be successful at real estate investing in college towns:

1. Conduct Research and Due Diligence

Just like investing in urban areas, every college town is different. Your research and due diligence should focus on the local market, from the potential growth of the university to enrolment trends and employment rates. Doing this research at the beginning of your property search can help you avoid college towns that have saturated real estate markets for student housing. 

If a private university has strict housing policies and extensive on-campus housing available, it may not be the most attractive option for real estate investors. You’ll also want to explore local regulations including occupancy limits for student housing. 

2. Building Relationships with Local Colleges

Colleges are responsible for the welfare of their students, including helping them find accommodation. If you’re focusing on investing in college towns on a wider scale, building a relationship with the local colleges can help attract would-be tenants. The college’s housing department may be able to advertise your property, including to students who are attending summer classes to keep your property occupied year-round. 

3. Targeting Niche Markets

Students, faculty, and staff don’t fall into just one category. Seasoned investors may choose to focus on a niche market, such as graduate students or international students, who may be able to afford luxury accommodation. Doing your research into a college town might identify gaps in the market, especially if there’s a shortage in rental properties for faculty members.

4. Professional Property Management

Even if you oversee your other investment properties, you’ll want to consider investing in professional property management. Student housing and college towns have a higher turnover rate with students having unique needs. A property management company can oversee the tenant screening process and handle maintenance and repair work.