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Australia’s unbeatable sunny climate and world-class education attracts millions of students every year. These students, both domestic and international, make up a sizable market of tenants for property owners like you. Any property investor is bound to have had some students express interest in their rental.
That begs the question: should you rent to students? You’ll usually have to invest in specific locations to capture the market, and horror stories of parties and unwashed dishes might have given you a bit of a scare.
To help you decide, we’ve outlined the main advantages and disadvantages of having students as tenants in Australia.
What are the advantages of renting to students?
Renting to students comes with 4 main benefits.
The earning potential, high demand, casualness of tenants and the potential for great WOM marketing makes university students an attractive target market.
1. Earning potential
Location is key, and students are willing to pay more for a rental that’s located in walking distance to uni, or with buses and trains that will take them directly to campus. If you’ve netted an investment property close by a large university, students as tenants are a great way to go.
Students are also more open to flat shares and roommates to save some extra cash. If your rental has multiple bedrooms, you’ll likely increase your rental income by renting out by the room instead of renting out the whole house.
For reference, the Australian Government tells students they can expect to pay from $95 to $440 per week for a rental property close to their university. If your property has 3 bedrooms, you can easily net a sizable $900 a week by renting out rooms to students. That’s not bad at all!
2. High demand
Aside from COVID-19's impact on your property, any property owner who rents out to students will tell you that the applications come flowing in every year and that they rarely suffer extended vacancies.
Every year before the first semester starts, an influx of new potential tenants come flying into the country looking for a place to live. If you time your check-out well with when you know the demand will spike, you’ll rarely ever have to be concerned about vacancies.
If the property leasing process, and advertising your property is something that concerns you, you can always bring a property manager on board to help you out. Read our article on how property managers help find tenants for more details.
3. Easy-going tenants
Many uni students are first time renters, and you’ll find that they are pretty easy to communicate with, and will listen to what you say and your guidelines.
You’ll also find that they foster a community in your rental, and make good friends with each other. Taking care of your tenants and helping them out should be a happy part of your day, and uni students tend to be particularly appreciative of it.
4. WOM marketing.
Students are quick to pass on the word about empty rooms and great places to live with their friends or acquaintances throughout the course of their degree. Often you’ll have your vacancies filled out before they even start!
What are the disadvantages of renting to students?
It’s not always sunny in Sydney! There are negative aspects of renting to university students that you need to consider before making the leap.
University students as tenants aren’t for everyone. Expect high turnover rates and a higher potential for problem tenants as background checks and references aren’t always an option.
1. High turnover
True or false?
“Since most university degrees are 3 years or more, most tenants will stay for 3 years (the full duration of their degree).”
Turns out that this is false, and a common misconception! In fact, student turnover is quite high, with 40% of students moving around at least once throughout the course of their degree.
You should expect that every year, there will be a vacancy to fill. Luckily, students tend to not move out in the middle of a semester, which lets you plan ahead with a lot of security each year.
2. Potential problem tenants
We mentioned that university students are often first-time renters. This is a double-edged sword. Most of them are easy-going, but the problem-tenants are hard to spot.
Since there are no references or rental history you can check for most university students, you’re taking a shot in the dark about the quality of a tenant.
Parties that go overboard, rental payment arrears and tenants that treat the property poorly are things you will absolutely come across if you’re renting to university students.
There’s also the potential issue that disputes might arise between the tenants themselves when you’re renting out by room.
3. Financial instability
Uni students in Australia usually rely on their parents or government grants to cover their living expenses. Some also do a part-time job on the side. Overall, the financial security of these tenants can be a hit or a miss.
After all, it’s self-explanatory that students without a university degree or a full-time job are not the country’s top earners.
So, when should you rent to students?
As with any tenant, renting to university students has its ups and downs. But, with a well-managed property they’re a great target market that yields high rental income and shows strong demand which helps prevent vacancies.
University students as tenants are a great option if you want to increase your rental yield, and enjoy interacting with people in your property management duties.
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Disclaimer: The views, information, or opinions expressed in this blog post are for general information purposes only and should not be relied upon. We have not taken into account specific situations, facts or circumstances, and no part of this blog post constitutes personal financial, legal, or tax advice to you.