College towns are hot real estate marketsDate posted: 8/6/15 10:30:00 AM
Finding a housing market that seems like a safe venture is never an easy feat for investors, but there might be a few more places around the country that have the potential to remain relatively undamaged by the oscillating economic environment.
College towns fit this type of bill, according to RealtyTrac, a source for housing information. College towns provide investors with a fairly safe market to conduct business, as they experience a large number of people looking to rent or buy homes at the start of each school year.
Investopedia reported that most universities don't have enough on-campus housing to meet the demand of students. Many graduate students and older undergrads prefer to live off campus, and that's not even including a university's lengthy list of professors and staff that need to rent or buy housing.
"They tend to be insulated from the volatility that many other markets experience because of the large source of employment from the university there," said Daren Blomquist, vice president of RealtyTrac.
Some families with students living in a college town are also deciding to buy properties as an investment. Their children can live in these homes instead of forking over cash toward on-campus housing, and then once they've graduated, the family can either look to sell the home for short-term profit or choose to rent the property for a long-term stream of cash.
While residential homes in college towns aren't completely void of risks - which can include high turnover rates, a smaller pool of buyers for a housing flip and additional wear and tear due to young renters - the pros of investing in a college town largely outweigh the cons.
Best college towns for rental revenue
RealtyTrac calculated the nation's 10 best college towns for rental revenue.
"We wanted to zero in on college towns because they are often some of the best markets to invest in," Blomquist said.
RealtyTrac reported the top rental spot in the nation for revenue is currently University of Akron in Ohio. Investors renting out properties in Akron yield an annual gross rental rate of 13.81 percent.
Thomas Edison State College in Trenton, New Jersey (13.2 percent), the University of Florida in Gainesville (11.34 percent), the University of Cincinnati (11.28 percent) and Ohio State University in Columbus (10.97 percent) round out the nation's five best college towns for annual rental revenue.
College towns in the top 10 for best rentals included: Northern Illinois University in Dekalb; the University of Pittsburgh; Kent State University in Kent, Ohio; the University of Nebraska in Lincoln; and Broward College in Ft. Lauderdale, Florida.
The best college towns for house flipping
But not every investor wants to rent a property for the long-term. Some are looking to buy distressed or poorly maintained properties to fix them up and resell them for a quick turnaround.
For those investors, the University of Minnesota in Minneapolis was the top college town for housing flippers. In Minneapolis, flippers netted an average return on investment of 65.59 percent for an average gross profit of $105,292.
The University of Washington in Seattle (61.88 percent return on investment), the University of Nebraska (55.01 percent ROI), San Francisco State (54.16 percent ROI) and Thomas Edison State College (48.06 percent ROI) were also among the best markets for housing flippers.
The University of Florida, University of Colorado, University of Cincinnati, University of Akron and North Carolina State in Raleigh all made the top 10 for best flipping markets among college towns.
Greg Smith, broker/owner of RE/MAX Alliance in Boulder, Colorado, told RealtyTrac the University of Colorado has major potential.
"Boulder shows strong rental rates with rents of $800 to $1,000 per bedroom close to campus and a vacancy rate of one percent," Smith said. "Boulder investment properties are selling at an all-time high with many properties selling for cap rates of less than five percent."
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