Investing in student rental properties throughout San Diego is a challenge not every landlord is cut out for. Its illustrious universities offer opportunities for expensive rent charges and high demand for housing. Because of this, San Diego colleges provide a compelling and potentially lucrative investment opportunity in the realm of student rental properties. While landlords can’t raise rent by more than 10% in many cases throughout California, student rentals still yield high returns for investors.
Let’s dive in and explore the pros and cons of investing in student rental properties near universities in San Diego.
Pros of Investing in Student Rentals in San Diego
Student housing investments have outperformed conventional apartments by a landslide in the past few years. That’s right, the rent checks signed by hard-working students are contributing to a significant return on investment for the savvy San Diego real estate investors who’ve decided to invest in this niche market. With the abundant student population of San Diego, this Southern Californian college town represents a golden opportunity.
1. High Demand
San Diego is home to several esteemed universities and colleges, including San Diego State University (SDSU), the University of San Diego (USD), and the University of California, San Diego (UCSD). Combined, these institutions attract thousands of students every year, many of whom are in dire need of a place to call home during their academic journey.
The demand for rental properties near these institutions is perpetually high, as students prefer living near their campuses for easy commutes and access to college amenities. This provides a steady flow of potential tenants each year and reduces vacancy rates. After all, the annual churn of students ensures that new renters are always just around the corner.
Moreover, SDSU, USD, and UCSD are not the only games in town. With institutions like Point Loma Nazarene University and San Diego City College also drawing in students, the potential renter pool expands even further.
2. Premium Rent
Another major advantage of investing in student rental properties is the opportunity to charge a premium rent. Given their proximity to campus, these properties often command higher rent than similar properties in other parts of the city. Countless house buyers in San Diego are pivoting to student rentals because they generate higher rent amounts. You can’t blame them!
Students, particularly those coming from other cities or countries, value the convenience of being close to their educational institution and are often willing to pay a bit more for this luxury. Not only does this mean more income for you as the investor, but it also translates into potentially higher returns on your investment.
Moreover, student rentals often operate on a per-room basis, which allows for more revenue than renting the entire unit to a single family. It’s not uncommon for a three-bedroom house near SDSU or UCSD to be rented by three different students, each paying a separate rent that, in total, surpasses what a family might pay for the same space.
3. Market Stability
Student rental properties in San Diego offer market stability that few other investment opportunities can match. Even during economic downturns, the demand for education, and therefore student housing, remains largely constant. Plus, San Diego landlords can utilize a backup strategy of listing a house on Airbnb instead if they’re struggling to find good student renters. Options are endless when owning a rental property in a strong market.
Universities like SDSU, UCSD, and USD have shown steady or increasing enrollment numbers over the years. This trend provides a degree of security for investors, who can rest assured knowing their rental property will continue to attract tenants regardless of the broader economic climate. After all, education remains a top priority for many, regardless of how the stock market is performing.
Cons of Investing in Student Rentals in San Diego
Investing in student rental properties in San Diego certainly isn’t without its challenges. The high turnover rate of students can mean a constant cycle of vacancies and new tenants, often leading to increased maintenance and advertising costs. Student tenants, while full of potential and enthusiasm, can sometimes cause considerable wear and tear on your property, potentially leading to unexpected repair bills. Plus, managing these properties can be a demanding task.
1. Endless Tenant Turnover
Sweet mercy, you’d think running a revolving door for these kids would be easy, right? Well, hold onto your lease agreements, because the turnover rate with student rentals is a wild ride. They’re here today and gone tomorrow. A.K.A., your student renters will arrive in September and leave by June. Just when you think you can catch your breath, here comes another wave of bright-eyed, bushy-tailed students.
Every time they clear out, you’re left with the fallout. Let me tell you, it isn’t just dust bunnies under the bed. We’re talking about re-advertising the property, cleaning, maintenance, and the odd repair job that conveniently wasn’t mentioned before they moved out. Not to mention those awkward summer months when the tumbleweeds are rolling through your rental, echoing the lack of rental income.
2. Your Property: The Battlefield
If you thought your student years were hard, try being the property that houses them. Saturday night parties and impromptu “study” sessions that somehow end in a broken lamp can ensue. Hopeful landlords pray that their student renters travel to cafes to study versus partying inside their investment property. All this can result in some serious wear and tear on your house.
College student renters aren’t always the most house-proud bunch. I’m not saying all of them, but it just takes one “forgetful” tenant to cause a whole lot of chaos. While you hold a small security deposit as protection, it feels like a sandbag against a tsunami. Brace yourself for the costs that could, and most likely will, exceed that upfront deposit.
3. The Landlord Life: Not for the Faint-hearted
You think you’re just investing in a property? False! Welcome to your new full-time job—part referee, part handyman, part parent figure. Student rentals demand your attention, often at the most inconvenient times. Leaky faucet at 3 am? You’ll hear about it. Internet’s down in the middle of a crucial online exam? You’re the first on their speed dial.
Every day brings a new issue to solve. Oftentimes, roommates won’t get along while living in your student rental property. Landlords are sometimes forced to get involved and attempt to keep the peace. Especially if you’re renting out your property by the room, roommates rarely ever are on the same page. Investing in San Diego student rentals is enough to make your head spin.
Considering all this, you might wonder if a property management company could be your knight in shining armor. They might be, but for a price. Expect to pay at least 8-10% of your monthly rental income to pass the torch to your property manager. If the numbers of your student rental investment in San Diego still pencils out, get ready and plunge in.
Buying San Diego Student Housing
While there are both advantages and disadvantages to investing in student rental properties near San Diego’s universities, the potential for high returns draws many investors in. Student housing sounds appealing on paper, but must be executed correctly to avoid major headaches as a landlord. Carefully plan how to intend to manage the units. Investing in San Diego student rental properties could be a profitable decision that also contributes positively to the local community and the lives of countless students.