If you’re considering investing in a rental property, you might want to consider university towns for your location. You will still have to do research because there are no guarantees, however, university towns have proven to give high returns on investment. And the reasons make sense when you consider the following:

Firstly, university towns offer higher demand than most in metropolitan areas. There are new students every semester, so demand is steady. Additionally, universities employ thousands of professors, teacher-assistants, administrators, etc. So you will never be short of choices for tenants. A high demand equals a high occupancy rate, which equals a low-risk investment. 

Secondly, seeing as universities provide so many jobs, it’s clear they support the local economy. And a strong local economy equals a steady appreciation of the value of your investment. So even when the market is down, the rent will likely remain stable in university towns.

Thirdly, university towns provide many local attractions and better local transportation. There are often many restaurants, bars, and shops near the university, so the walking score is higher. And universities often offer their own transport to help the students, while also helping the local population. So you will save a lot on marketing because the university does it for you.

Lastly, students often have the highest consistency for making rent payments. That may come as a surprise to many landlords, but you have to consider the fact that parents are the ones paying their children’s rent most of the time. So landlords don’t have to worry as much about getting a bad tenant who won’t pay the rent on time.

The reasons mentioned above all play a role in why university towns often have higher ROIs. In a study done by Homes.com, the top 10 university towns to invest in were the following:

1. Champaign, Illinois: 14.02% yield
2. Rochester, New York: 13.49% yield
3. New Haven, Connecticut: 12.14% yield
4. McAllen, Texas: 11.16% yield
5. Providence, Rhode Island: 10.93% yield
6. Urbana, Illinois: 10.91% yield
7. Corpus Christi, Texas: 10.52% yield
8. Statesboro, Georgia: 10.50% yield
9. Buffalo, New York: 10.31% yield
10. Baltimore, Maryland: 10.16% yield

The study looked at around 150 college towns across the United States and measured the ROI by comparing the average purchase price of a three-bedroom home to the average monthly rent of a three-bedroom home and average annual rent. The data was derived from the listings on Homes.com

The high ROIs may appear promising, but don’t expect renting in a university town to be easy passive income. While there are many benefits to renting in university towns, there are also a few downsides like higher tenant turnover and risk of property damage. So it will be up to you whether the higher ROI outweighs the risk of a few downsides. 

Of course, there are ways to decrease your chance of getting a bad tenant. With sites like trintals.com, you can screen tenants for free and get access to their credit report, criminal history, and rental history, thereby ensuring you get the best tenant before signing the lease.