Buying Rental Properties Near Michigan State University

Many parents of MSU students or homebuyers looking for an investment property see the rental potential in East Lansing properties. While renting to students in East Lansing can be a lucrative investment, it’s important to understand the City of East Lansing’s rules about renting first. Not all properties are available to rent and any that can be rented require a rental license. Here’s what you need to know about buying rental properties near Michigan State University before you start looking for real estate.

What are the Zoning Restrictions on Rental Properties in East Lansing?

In an effort to keep population density at manageable levels, and to maintain a peaceful atmosphere in many neighborhoods, the City of East Lansing put zoning restrictions on rental licenses in 2004. This means many properties cannot be rented at all.

Areas with rental restrictions are called “overlay districts,” and there are several types. The three main overlay districts prohibit all rental licenses, include Class I. A Class I rental license allows you to rent all or part of your property to one unrelated person.

To see if the property you are interested in falls within an overlay district, take a look at this overlay district map provided by the City of East Lansing.

This information from the City of East Lansing page on overlay districts can help explain:

  • “Residential Rental Restriction Overlay District R-O-1: prohibits issuance of any new rental licenses, including Class I rental licenses.”
  • “Residential Rental Restriction Overlay District R-O-2: allows the current property owner to apply for a Class I rental license if they owned the property at the time the overlay is approved. When properties are sold after the time in which the overlay was approved the property is no longer eligible to apply for a Class I rental license.”
  • “Residential Rental Restriction Overlay District R-O-3: allows owners to apply for a Class I rental license. However, the property owner does not need to have owned the property prior to the approval of the overlay district.”

Are There Other Rental Restrictions in East Lansing?

Some individual properties may also be deed restricted parcels, which restricts renting for a period of 20 or 30 years. Homeowners associations (HOAs) may also put restrictions on leasing. If you are buying a property to rent it, it is important to check with the HOA and the East Lansing Register of Deeds first.

Can I Rent my East Lansing Home to my Adult Son or Daughter?

Rental restrictions do not apply to family members, even if they are legal adults and paying to occupy the property. Your son or daughter (or step child or legally adopted child) may occupy the home without any type of rental license. This also extends to their children (your grandchildren). However, this does not include your child’s partner, whether married or unmarried, or friends, or your own nieces, nephews, cousins or other extended family. For this, you will need the appropriate rental license.

How Are Zoning Laws about Rental Properties Enforced in East Lansing?

East Lansing is comprised of many, smaller, close-knit communities. Residents decide on zoning regulations together and vote on these decisions. This means failing to follow zoning regulations will generally attract the notice of your neighbors. Neighbors or other concerned citizens in the area may contact you first, or they may speak directly with the City of East Lansing or the East Lansing police department to report an occupancy issue. If the police determine occupancy regulations are not being met, the owners will be responsible for fines and anyone not licensed to live on the property must vacate.

Obviously, this results in complications and difficult situations for everyone involved. The easiest way to avoid this situation is to obtain the proper rental licenses right from the start. If you are purchasing a home with the sole intention to rent it, make sure it is legal to do so before purchasing it.

How do I Get a Rental License in East Lansing?

If your home is not in an overlay district, you can apply for a rental license with the City of East Lansing. This will require some patience and attention to procedure, as well as filling out applications and paying fees. Your application must be reviewed by the Housing Commission and City Council. Licensing also requires an inspection and all codes must be met. For details about the application process, visit the City of East Lansing rental license page.

East Lansing and MSU maintain a very good relationship, and this is partly due to the balance that East Lansing communities maintain. This requires everyone’s cooperation. Renting homes in East Lansing for students is a valuable opportunity for homeowners and it is also an important part of the East Lansing community, but this must be done properly. If you have questions about buying a property to rent in East Lansing and you’d like to learn more, give me a call or send me a message.

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