Renting to Students – The Pros and Cons

Millions of students are drawn to Australia each year by its unmatched sunny weather and top-notch education. For landlords like you, these students—domestic and foreign—represent a significant market of potential tenants. Any landlord has probably had some college kids contact them about renting from them.

That raises the issue of whether or not to rent to students. To gain market share, you'll typically need to invest in particular areas, and tales of horror of parties and dirty dishes may have scared you a little.

We've listed the main benefits and drawbacks of renting to students in Australia to aid in your decision-making.

Would you like to speak to a specialist? Book a complimentary discovery session by calling: (03)999 81940 or emailing team@klearpicture.com.au.

What are the advantages of renting to students?

Four key advantages come with renting to students.

University students are a desirable target market due to their high earning potential, strong demand, casual attitude about tenants, and potential for effective WOM marketing.

1. Earning potential

Students are willing to spend more for a rental that is close to their university or that has buses and trains that will carry them straight to their campus because the location is so important. Students make fantastic tenants if you have an investment property close to a big institution.

In order to save money, students are increasingly more receptive to flatshares and housemates. If your property includes more than one bedroom, renting out the individual bedroom rather than the entire residence will probably result in a higher rental income.

As a point of reference, the Australian Government informs students that rent for a home close to their university can range from $95 to $440 per week. If your home has three bedrooms, renting out rooms to students can easily bring in a healthy $900 per week. That's actually rather good!

2. High demand

Any landlord who leases to students will tell you that, aside from COVID-19's effects on your property, applications pour in every year, and they rarely experience prolonged vacancies.

Before the first semester begins each year, a large number of new prospective tenants fly into the nation in search of housing. You won't ever have to worry about vacancies if you know when to time your check-out when demand will increase.

You can always hire a property manager to assist you if the leasing and marketing of your property are worries of yours. For additional information, please read our article on how property managers assist with tenant sourcing.

3. Easy-going tenants

Many university students are first-time tenants, and you'll find that they're generally easygoing and receptive to your instructions.

Additionally, you'll observe that they create a sense of community and get along well with one another in your property. University students are especially appreciative of your assistance with their needs, so taking care of your tenants and aiding them should be a joyful part of your day.

4. WOM marketing

Throughout their degree, students are keen to share information about available housing with their friends and acquaintances. Frequently, your openings will be filled before they even open!

What are the disadvantages of renting to students?

Melbourne doesn't always have nice weather! You should think twice before renting to college students because there are drawbacks.

Not everyone wants to live with university students as tenants. Given that background checks and references aren't always an option, anticipate high renter turnover rates and a higher likelihood of problematic tenants.

1. High turnover

False or true?

Most tenants will stay for three years (the length of their degree), as the majority of university degrees take three years or longer to complete.

It turns out that this is a false belief that is widely held! A significant portion of students moves around, with 40% doing so at least once during their degree.

Every year, there will be a position that needs to be filled, so prepare for it. The fact that most students don't leave in the middle of a semester, fortunately, allows you to plan each year with a great deal of security.

2. Potential problem tenants

University students are frequently first-time tenants, as we previously noted. This has two sides to it. Most of them are laid-back, but it's difficult to identify the problematic tenants.

You have to guess about the character of a tenant because most university students don't have references or a rental history you can check.

If you rent to university students, you may encounter overly boisterous parties, late rent payments, and disrespectful occupants.

When you rent out my space, there's also the potential problem that disagreements can develop between the renters.

3. Financial instability

Australian university students typically rely on financial aid from the government or their parents to fund their living expenses. Some people additionally work a second job on the side. In general, these tenants' financial stability can be hit or miss.

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After all, it goes without saying that students without a college degree or a job that pays a living wage are not among the top earners in the nation.

So, when should you rent to students?

Renting to college students has its ups and downs, just like renting to any tenant. However, they make a terrific target market for a well-managed property since they generate high rental income and have a high level of demand, which reduces vacancies.

If you want to boost your rental yield and enjoy connecting with people while managing your property, choosing university students as renters is a terrific choice.

Investing to attract students as tenants is a terrific real estate investing strategy if you value high rental return or love the interpersonal aspects of property management, particularly the energy of young and active students.

Do I Need An Agent to Rent Out My Property?

As any owner of investment property is aware, a vacant property is useless.

Even the most experienced investors may find it expensive, frustrating, and time-consuming to locate a renter, commonly known as leasing or renting out their property.

It makes sense that a lot of investors worry if they need to hire an agency to rent out their home. To rent out your home and locate you new renters, the majority of property managers will charge an extra fee. This is due to the substantial additional work required.

We will describe the steps needed to rent out a property in this blog article. You'll discover how to manage your rental property on your own, and we'll add our insight into how a property manager supports the process.

These steps will equip you with the information, self-assurance, and tools you need to make an informed decision about whether it is more advantageous to rent out your property directly or through an agent.

How to make your investment home a rental

Four steps make up the process of renting out your investment property:

1. Choosing a rental
2. Promoting the location
3. Locating a suitable tenant
4. Placing the bond and signing the lease

Step 1 : Choosing a rental

You would think that advertising your home is the first thing to do, but if you put it on the market before completing any kind of market research, it's likely that you won't get the best possible return on your investment.

If you are renting out your house on your own, you are responsible for conducting your own research in order to ensure that the property is attracting the appropriate tenants.

After you have an idea of the average rent for properties in your neighbourhood, you will need to make a decision about what price you want to set your property at in order to rent it out.

An experienced real estate agent will be able to provide you with an accurate rental appraisal for your property and will already have a solid grasp of the market conditions. They will also be able to supply you with this evaluation in a timely manner. They will be aware of the optimal rental pricing that should be set for your property as well as the best ways to maximise the return that you get on your investment.

Consider the following questions in light of the fact that the aforementioned factors might have an effect on the amount of rent that a renter is willing to pay:

1. Will the house be equipped or unfurnished?

Although it is a matter of personal preference, property owners have the option of charging a higher rent for furnished rentals, offering a furnished alternative in exchange for a higher rate, or offering to unfurnish a furnished property in exchange for a reduced rate.

2. My tenant or I will be responsible for making the utility payments?

If you choose to include costs in the rent, the rent should be higher; but, you run the risk of tenants leaving the lights, the air conditioning, or the water running constantly all the time.

3. How easily can I get to my property?

The proximity of the rental property to public transportation, shopping, and other leisure activities should, as a general rule, cause the rent to be higher.

In a similar vein, if your home has a garage or another enclosed parking area, you could perhaps increase the monthly rent amount. Be mindful, however, that if a tenant comes to the conclusion that they do not require a parking place, they may also be willing to negotiate a rent reduction with you.

Step 2: Promoting the location

You've chosen the rental rate, now it's time to look for potential tenants.

Unfortunately, your options will be more constrained if you choose to do it yourself. Only licenced real estate agents are permitted to create listings on well-known websites like Domain and realestate.com.au. You must instead promote your property on websites like Gumtree, Facebook Marketplace, and rent.com.au.

You want your rental home to appear its best in order to draw potential tenants. Since the quality of professional images will be far higher than that of photos taken with a phone, you might want to think about making the investment.

When trying to attract tenants, a clear, well-written description that goes along with these photographs is also really helpful.

In most cases, the leasing cost charged by property managers includes photography and advertising. A smart property manager will have secured agreements with the best real estate websites to provide their owners with competitive advertising pricing.

Step 3: Locating a suitable tenant

After conducting your research and setting up your listing, you start receiving calls.

The next step is to not forget to block off time in your agenda for property inspections.

Inspections may take place in public or privately.

When you set aside a certain period for potential tenants to examine the home, an open inspection is typically performed over the weekend.

Private inspections occur when potential tenants get in touch with you personally and schedule a visit to the property.

It can be challenging to find time for personal reviews if you are overburdened with work or other obligations. However, allowing for personal evaluations can dramatically expand the reach of your property.

It's imperative to be prepared with responses to the most often asked questions before to conducting an inspection with any potential tenants. You won't be caught off guard during the inspection if you do this.

The most typical inquiries include the following:

• How far must I travel to get groceries?
• What sort of parking is available?
• Are rent, the bond amount, and the lease term negotiable?
• Is it acceptable that I have a cat or dog?
• What kind of internet access is available at your location?

You'll gain experience as you conduct more inspections, but doing so may cause you to initially overlook some excellent tenants.

You should ask a tenant who displays interest to submit an application. This typically includes details that can confirm if the tenant has a respectable credit rating, a solid rental history, and a steady source of income to cover the rent.

There are countless rental application choices available, as a fast Google search will demonstrate. For your convenience, we've provided one here that you can utilise.

Keep in mind, though, that owners don't have as easy a way to access the same databases for background checks that real estate brokers have. Instead, think about incorporating a space for referees since that would be the most practical approach to confirm that the tenant will fulfil their obligations.

It would be beneficial if you also remembered that character references may not be as trustworthy as background checks. In the end, choosing a tenant may need you to follow your gut instinct and intuition.

The benefit of having a skilled agent on your side at this phase is greatest. Not only will they have access to background check databases that accurately predict who would make ideal tenants, but they will also be skilled at responding to inquiries and putting your property in the best possible light.

Step 4 : Placing the bond and signing the lease

Congratulations! You have now reached the point when you have successfully done all of the preliminary work and found a tenant. Unfortuitously, that is not the end of the story.

The next thing that has to be done is to draught a lease agreement twice so that both parties can have a written record of what they expect from the arrangement.

When you are taking on a new tenant from the majority of state bodies, you can use any one of the following lease agreements:

• NSW - Fair Trading
• VIC - Consumer Affairs
• QLD - Residential Tenancies Authority
• WA - Department of Mines, Industry Regulation and Safety
• SA - SA.GOV.AU - information and services for South Australians

After you sign the lease, you must deposit a certain amount of bond money with the appropriate state agency. All of them are linked here for your convenience:

• NSW - Fair Trading
• QLD - Residential Tenancies Authority
• VIC - Residential Tenancies Bond Authority
• TAS - Consumer, Building and Occupational Services
• SA - SA.GOV.AU - information and services for South Australians
• WA - Department of Mines, Industry Regulation and Safety
• ACT - ACT Revenue Office

Bonds should be paid directly to the owner and held in trust because the Northern Territory lacks a centralised bond authority. For more details on this, visit the Northern Territory Government information and services.

Would you like to speak to a specialist? Book a complimentary discovery session by calling: (03)999 81940 or emailing team@klearpicture.com.au.

Bonus: Visiting the Tribunal

If, despite all of your efforts, it turns out that the renter you have located is not a very good tenant, you may find yourself in the unfortunate position of having to evict your tenant. This is a sad but true reality. If your renter regularly misses payments or breaches the terms of the leasing agreement in any other way, you may find that it is necessary to take this step, despite the fact that you will not want to do so lightly.

This can be a drawn-out and challenging process for independent proprietors because it typically involves putting the matter before the Tribunal, which can result in additional expenses and financial losses.

If you end up having to take the tenant to court for any reason, having an experienced property manager on your side will make the process much simpler. Because, more importantly, they are trained to make sure that only excellent tenants rent your investment property, the likelihood of difficulties from the beginning is lowered. This makes a major difference.