Most investors think of college towns as good places for real estate investments because they tend to have relatively affordable housing, a steady stream of potential tenants and buyers, and are somewhat recession-resistant. However, as CNBC Money reporter Sarah Berger put it, “Some college towns make for much savvier investments than others.”
In a recent study released by listing website Homes.com, the company’s researchers identified 10 college towns currently posting yields at 10 percent or higher of the purchase price. The study measured yields based on average monthly rental income for a three-bedroom unit and average purchase price for that unit. It assumed annual rent, not just rental income during the school year. The study population of towns and cities was pulled from WalletHub’s “2018 Best College Towns & Cities in America” report.
The Top 5 College Towns and Cities
According to the report, the top five cities are:
- Champaign, Illinois
average yield: 14% - Rochester, New York
average yield: 13.49% - New Haven, Connecticut
average yield: 12.14% - McAllen, Texas
average yield: 11.16% - Providence, Rhode Island
average yield: 10.93%
Pros and Cons from the Report
According to the report, several common assumptions about investing in college towns may be wrong. For example, large towns and cities “do not necessarily give the highest yields” but, the researchers noted, “larger populations (300,000+) typically promise an easier search for tenants.” Of populations of that size or larger, Corpus Christi, Texas posted the highest returns with 10.52%. Overall, the city was seventh on the list.
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