Student Housing Move Out Is Where Fairness Gets Tested

By Richard Joseph Spinelli, Sandhills Real Estate

The last walkthrough of the year happens in a five bedroom apartment that has been lived in hard since September, with the boxes already carried down and the windows open to air it out. Four of the five residents are graduating in a few weeks and will never rent from anybody in this neighborhood again. I am Richard Joseph Spinelli, and I cofounded Sandhills Real Estate, which buys, renovates and operates student housing around the Rose Hill campus of Fordham University in the Bronx.

This is written for operators and small landlords who run student housing in a college market, and for anyone who has to decide in June what a worn apartment is going to cost the people who lived in it. The hour I am describing is short, it is unglamorous, and almost nothing in the operating year pushes an owner to do it well.

The Move Out Walkthrough Is Easy to Underinvest In

Every other piece of the student housing year pays you back in something you can see. A showing produces a signed lease, a turn week produces a finished unit on move in day, a repair produces a household that stops calling about the same thing.

The move out walkthrough produces nothing you can point at. It is pure cost in the moment, it lands in the same weeks as turn planning and the first deliveries of the summer, and the residents involved are on their way out of your life.

So it gets done quickly, by whoever happens to be free, with a phone camera and no written standard. I have done it that way. The result was not unfair so much as inconsistent, which across a portfolio becomes its own kind of unfair.

What changed it for us was a sheet of paper rather than more time. We wrote down the conditions we will never charge a household for, the short list we always will, and the handful in between that require somebody to look at the room and make a call.

Ordinary Wear in Prewar Student Housing Is Predictable

Our buildings sit on and around Belmont Avenue, Lorillard Place and Bathgate Avenue, and most of them are prewar. Plaster develops hairlines, floor finish goes dull in the three feet inside every doorway, and paint takes nine months of backpacks against it.

None of that is a surprise to anyone who has spent time with old housing stock, and the National Park Service preservation briefs on historic building materials describe the same behavior in plaster and wood that we see every June. Old buildings age in a small number of recognizable ways.

The sheet itself is short. Scuffed paint at shoulder height, dulled finish inside a doorway, a hairline in plaster above a window frame and a cabinet hinge that has worked loose all sit on the ordinary side, and they come off the list before anyone starts adding anything up.

Across 13 assets and 27 units housing more than 100 students, we see the same short list of conditions at the end of every lease year. That repetition is the whole opportunity. A condition you can predict is a condition you can write down in advance, and a standard written in advance is the only thing that makes two walkthroughs in two different apartments come out the same way.

A walkthrough that goes looking for chargeable damage will always find some, which is exactly why the standard has to be set before anybody walks in the door.

Most Student Renters Are Signing Their First Lease

For most of our residents, the lease they sign with us is the first one of their lives. They have no basis for comparison, no sense of what is normal to be charged for, and no practical way to argue with a line item written by the person who owns the building.

That asymmetry is the reason I think the standard belongs in the hands of the residents at signing rather than at move out. We tell a group in writing what we consider ordinary wear and what we consider damage before they have lived a single day in the apartment, and we walk the unit at the end with somebody from the group present rather than mailing them the verdict.

Plenty of operators I respect think this is a mistake, and their objection is reasonable. Publishing the standard early, they argue, hands a group a document to negotiate against and turns a five minute conversation into an argument. My experience is the opposite. The negotiation happens because the standard was never stated, and a group that knew the rule in September has very little to dispute in June.

It helps that these groups form and decide together. I have written before about how a group reaches a decision at a showing, socially and quickly, and the same thing is true at the other end of the lease. One person walks away feeling itemized and by the weekend the whole household has the story.

What Absorbing Ordinary Wear Costs a Small Operator

Absorbing ordinary wear means we repaint and refinish on our own account every summer, and because Sandhills is vertically integrated and does this work in house, that cost shows up as our own crews and our own weeks rather than as an invoice somebody else sends.

It also means we are wrong in one direction on purpose. The line between careless and ordinary is not clean, and some of what we absorb was not ordinary at all. I would rather be occasionally generous with a household that did not earn it than build a process that quietly recovers its costs from students who cannot tell the difference.

That choice is easier to defend in a year when the buildings behave and harder in a year when three units need more than a repaint. The cost is real, it arrives in the same weeks as everything else, and nobody outside the company ever sees it. An operator who tells you this is free is describing a smaller portfolio than the one they are standing in.

The honest limit is that this only works at our size. One person can hold the standard in their head across 27 units, walk every unit personally, and make the judgment call in the doorway. Rental housing operators at larger scale are not being cynical when they move to an itemized schedule, and the Census Bureau housing statistics describe a rental market where most units belong to portfolios where nobody is walking anything personally.

How this survives growth is something I cannot answer well. The resources published by the campus housing profession are full of institutions that solved consistency with policy precisely because judgment did not scale, and if we keep buying near Rose Hill we will meet that same wall.

What I can say is that the hour at the end of a tenancy is the one moment when an operator is deciding something about a resident who has no leverage left. That is not a bad working definition of when fairness actually gets tested. I would rather be wrong in the direction of the resident than technically correct in an empty apartment in June.

Fairness at move out ties into what I have written about promises and first leases, gathered in the companion notes for this essay.

Richard Joseph Spinelli is the cofounder of Sandhills Real Estate, a student housing owner and operator in the Bronx. More at richardjosephspinelli.com.