When you live and work in College Station, Texas, it's pretty hard to ignore the teeming number of Texas A&M students who make this college town—and its neighbor, Bryan Station—their home. After all, there are more than 45,000 Aggies attending A&M. Unfortunately, the university only has room for 10,000 students to live on campus.
All those students in search of a place to call home are a phenomenon that home builder Randy French couldn't miss. So about eight years ago, French, president and owner of Stylecraft Builders in College Station, started putting up three- and four-bedroom houses specifically geared to the university rental market.
But what he soon found out is that, while college students were an almost guaranteed stable market, they come with their own set of issues. “People don't like living right next door to students, so we started putting our usual product—a three-or four-bedroom home with a front-loaded garage—in a separate section of each subdivision,” says French.
At first, parents were the primary buyers, making up 70 percent of the homeowners, with investors picking up the other 30 percent. Modestly priced houses in the area typically appreciate at a steady 3 percent to 4 percent per year, which made investing in a home for the kids financially viable, especially for those loyal legacy families with multiple children destined for A&M.
The cash flow was such that the rent paid by four students for a four-bedroom house—typically $400 apiece these days—covered the mortgage and then some. Over the years, the investment ratio has flipped; investors now account for 70 percent of buyers, with parents coming in at 30 percent.
So, from a cash-flow perspective, all was well in Aggieland. But things weren't looking so good back in the neighborhood. Over time it became all too clear which Stylecraft homes were filled with students and which were true single-family homes.
“One night I drove through one of those subdivisions and saw a sea of cars and pickups in driveways and parked on the street [in the student section],” French recalls. “The pizza delivery guy couldn't even get through. I said to myself, ‘This is nuts. We really shouldn't do this.'”