In many ways, college towns are a microcosm of opportunities for all levels of real estate investors.
It’s where there’s a little bit of everything — and likely a lot on anyone’s investment list. Students come and go each year, providing a stable rental market even during periods of correction or inflation.
Upper middle class and young families flock to college towns, drawn by more academic job openings and stellar, diverse school atmospheres.
Many decide to make college towns their home base for retirement, especially in areas where the cost of living is low and there are more options for restaurants, parks, artistic activities, and museums.
But not all college towns are an investment slam dunk. Some are actually ones to avoid. But Reed Pirain discusses where to look — and what to consider — before making real estate investments big and small in college towns.
The Type of Investment and Property Availability
Rental apartments, condos, and townhouses often come to mind when thinking of college town real estate investments. Most property in such towns will fall along these lines the closer to campus one gets.
Those looking to make middle-to-lower-risk investments often go with rental properties. Rent is either stable in such areas or rises predictably year-to-year, giving investments a good bang for their buck.
College communities are usually adjacent to such amenities as nightlife, boutique shopping, and parks, so finding properties close to these amenities is key. Athens, Georgia, is a great example of a real estate market that offers opportunities that are both middle-of-the-road for rentals and slightly more upscale for homebuyers looking to get out of Atlanta. If you have more money to invest, there are more upscale areas of the country to consider. For example, Boulder, Colorado is an extremely popular area with a very expensive real estate market even for vacation homes.
Who’s Looking
Well, for one, there will always be college students. While many students live on campus for at least the first year, there’s always a good number who shift to an apartment toward the end of their time in school. Many students, or groups of students, also rent homes, especially if they are close to nightlife and dining options.
On top of that, real estate investors can tap into those joining a college as adjunct professors or a staffer landing their first job. This is why young families commonly set up shop in college towns. Openings for full-time professors and upper-level administrators often mean high salaries — and people looking for larger homes.
Many people in this market tend to stick around their college town, even after graduating and retiring. That opens up surrounding areas to investors banking on the growth of suburban land within 20 minutes of the college town itself.
College Towns to Consider
Ready to invest? Here are a few college towns that provide numerous opportunities for budding and well-seasoned real estate investors.
• Knoxville, Tennessee: Home prices are high in this medium-sized city that’s home to the University of Tennessee and near small schools such as Lincoln Memorial University.
• Santa Barbara, California: The luxury real estate market thrives in this highly desirable city that’s home to six colleges.
• Pittsburgh, Pennsylvania: Or look into this city where there are around 70 institutions of higher learning and offers a high cash-on-cash return rate of 2.5%.
• Austin, Texas: The average three-bedroom home in this state capital is nearly $2,400 and rental prices rise around 15% to 20% each year.