Studying up on college-town real estate

Investors offer tips on off-campus rental housing

Mary Umberger

Brad Hastings is a landlord whose tenants are expected to follow certain rules: No candles. No American flags hung as curtains in the windows. And for heaven’s sake, he doesn’t want to find 50 beer cans on the lawn on Sunday mornings.

Hastings’ 400 tenants are college students in two small, Southern towns. And he says business is good — different, sometimes, from the typical landlord experience — but nonetheless good.

He and business partner Matt King decided five years ago to specialize in developing campus housing. They jumped from their former telecommunications careers into a growing real estate niche that seems to be fed by a rich demographic and economic diet.

It’s no secret that the recession has slammed American higher-education budgets, forcing a retreat from their plans to upgrade and expand on-campus housing, which would seem to offer an opening for private providers.

At the same time, colleges are bursting with students. Almost 40 percent of the nation’s 18- to 24-year-olds were enrolled in college last year, setting a new record, according to a Pew Research Center report. That amounts to 11.5 million students in two- and four-year colleges. The 2009 data isn’t complete, but the researchers estimated that current enrollment would be even higher.

All of those students have to sleep somewhere, and small real estate investors have taken notice.

While the general rental market struggles through the recession, off-campus apartments catering to students seem to be finding more success, according to Jim Arbury, an executive with the National Multi-Housing Council, a Washington, D.C.-based trade group for the apartment industry.

I wouldn’t say it’s recession-proof, but it’s recession-resistant, said Arbury. It’s still one of the bright spots in the housing market.

Arbury doesn’t have specific data on the occupancy rate of student apartments vs. the broader market, though he said it can vary widely by locale.

Hastings estimated that in Rock Hill, S.C. where his company, Walk2Campus, operates near Winthrop University, the local rental occupancy rate is 83 to 85 percent. By comparison, his 275 units in that town are 94 percent occupied. (And his company measures occupancy in number of bedrooms filled, rather than apartments rented out.) It also has another 125 units in Farmville, Va. near Longwood University.

Walk2Campus’ business model is based on buying and thoroughly renovating single-family homes that are an easy stroll to class.

We thought there would be high demand for proximity to campus and houses, he said. Frankly, having gone to college where there are houses and generic apartment complexes (Madison University in Virginia), it appeared to me that houses filled up first, he said.

Attracting and retaining college-student renters requires a certain touch, and the business is not for everyone, Hastings said.

It’s management-intensive, he said. You have a customer base who, possibly for the first time, are living out on their own. There’s a certain amount of hand-holding, teaching of life lessons.

Sotiria Krikelis knows. She owns a large house that she rents to students at Stony Brook University on Long Island in New York. There have been moments that have tested her, she says.

Because I also went to Stony Brook, I know when the party nights are, and all the tricks, she said. I recently had complaints of parties being held at the house, and I had to drive over there. I live an hour away, in Queens.

She said she has had to talk to tenants about the simple fixes they can do themselves, such as changing light bulbs or flipping a circuit-breaker switch to restore electrical service, rather than calling her.

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