Major college and university towns and state capitals do not have nearly the economic erosion during down times that most other cities across the country experience. As long as the number of students seeking education grows, so does the demand for housing in these markets. As a result, college towns in particular are inherently lower in risk, making them attractive investment destinations.
To get a perspective of investment properties, look at my blog on the 2017 National Association of Realtors’ Annual Survey of Vacation and Investment Homebuyers here. One out-of-every five buyers (19%) in that report were investment properties in 2015 and 2016.
To ascertain optimal investment markets for residential investment properties in college towns-cities, Redfin focused on affordable destinations that also offered comparably low tuition for a high-quality education. Included in their analysis were the following metrics and parameters:
- Only schools included in the S. News and World Report National University Rankings were considered, with the most recent ranking a key metric
- Median home list prices had to be less than $550,000 to make the list and were sourced from Redfin.con
- Walk Score was weighted less than the other metrics and was sourced from Redfin.com
- Tuition costs and fees
What were the best college towns under Redfin’s criteria for residential investment properties?
To read the entire list of top-20 cities ranked by Redfin click here.
At some point these investments need an exit strategy. As long as a growing number of students will be heading to colleges, these markets should perform comparably well. Do recall, however, the recession of 1981-1982 when the last of the Baby Boomers had left home and household formation rates peaked. No doubt the same will happen with Millennials. That apogee, however, is more than a decade distant.
As time evolves, likewise may the purpose of the investment. Some good friends originally purchased a home near Texas A&M for their son and daughter when in college. Following their graduation, the property became a rental. Today, that home is one of their second homes used by family and friends for athletic events, graduations and some online rentals.
Personally, I am a big fan of investments in major college and university towns and state capitals. Government rarely shrinks.