BiggerPockets

Are those single family houses? The numbers don't look that great (considering how much money you would be putting into them). The person who wrote the ad may be exaggerating (or not know) how much rent they will really bring in. Also they may have been updated, but will the college students be putting a lot of wear and tear on these units?

It seems like in Iowa you could find properties a lot cheaper than that. If you do a search for the 50% rule and the 2% rule it will give you a starting point in determining the rent/purchase price ratio and whether a deal is any good.

$450,000 for $4,200 a month in rent is not a good deal. Without knowing anything about your market I strongly suspect you can do better.

Don't be fooled that student housing is somehow better than other rentals. If anything, its worse. You'll turn over every unit every year. You're likely to have two months vacancy in the summer. A good portion of them will be complete pigs since this is the first time they've lived on their own and haven't caught on to good housekeeping. A few will be OK, a few will be total party animals.

Spend the next few months reading and learning this business. Learn about true expenses and the 50% rule. Now, if you're going to put your wife to work managing these, she will earn a chuck of that 50%. Consider sending her to real estate agent school, which is quick and easy (a few months, just a few hours a week.) This will get her up to speed on laws and local customer. She can sign up with a local brokerage and have access to the MLS, which is a big leg up.

First and foremost, learn about this business. Learn about the math and the laws. Then jump in. Don't be too hasty to buy something. Finding good deals is hard. Finding junk ones is easy.

Student rentals are different than a normal residential rental. You will probably be getting parents to co-sign for all the residents. You will need to learn how the rental market works there. At Indiana University, November is the start of the leasing season and most units have signed leases by January or February for the following August. The leases are usually just under 1 year, running from mid-August through July, this gives the management some time to repair the units between tenants. Here, the units are unfurnished and tenant usually pay all utilities (landlord pays water on multifamily). You will have to check out what the market is like in your area because all of the things I just mentioned vary greatly. The pros for student rentals are that you usually have very creditworthy cosigners, you can get large security deposits, vacancy tends to be lower, and the rent usually comes on time. The cons: students can be very hard on the property, if you don't get it leased by August, you will probably have a full year of vacancy.

I would recommend you read the property management for dummies book to get a basic idea of what is involved in managing your properties. If you decide to move forward, I believe it is essential you have the NOLO legal guide and tax deduction guide for landlords, they will prove extremely useful. And of course, this site is one of the best resources for most of your questions.

The first wave of foreclosures in much of the country came in 2007, so if it hasn't deflated in Iowa City by now, maybe it isn't going to? Not every part of the country had a bubble in prices like Florida and the western states did.

If you're interested in RE, it's worth driving around your area and looking at some foreclosures and seeing what the list and sold prices are.

The 2% rule is tough--I'm more partial to the 1.5% rule.

There are places where you can just find something on the MLS and have a good rental. Denver's certainly one of them. You want a good deal, you have to work for it. You kick over a lot of stones and kiss a lot of frogs. This business is not terrible complex, but it is hard. Finding a good deal is hard, much harder than just looking on the MLS.

Forget tax assessments as any sort of indicator of values. Maybe they are, probably they're not.

Many, many areas are over priced as far as rentals. You have to find an area that's not. The houses in my neighborhood are very similar to the houses in one of my rental areas. All built in the late 40's with similar construction and floor plans. And they rent for about the same. But they're much cheaper in the rental area. Research values in your area and you may find an area that works. I did 30 seconds searching and found a house listed at $99,000 that rentometer says will rent for $1150. Still not a great deal in my book, but closer than these other alternatives. What about Des Moines, Cedar Rapids, Waterloo, or Davenport? Are there areas there that have better rent/price ratios?

Can you find deals that need work? REO's or short sales or other distressed sellers? These turnkey, rent-ready deals may be convenient, but they're rarely a good deal. Some are terrible deals, shoddily fixed up, over priced, over hyped and sold to out of state investors that look at the deals through their local glasses. You're right there. Learn values, research areas and find something that works.

Don't get too hung up on the 2% rule. It works well if rents are around $500. If rents are $1000, you don't have to have such a good ratio to still rake off a profit each month. The 50% rule, OTOH, seems pretty solid. That simply states that expenses, vacancy and capital will eat 50% of the gross scheduled rents. Of course any particular property in any particular year may vary quite a bit, especially on the bad side. And if you're doing the property management yourself, you can earn the PM's chunk, with is 10-15% out of that 50%. In other words, if you manage yourself and do a good job and don't count your own time, then you should be able to hold actual expenses, capital (e.g., roofs or furnaces), and vacancy to 35-40%. If you goal is to "buy a job" for your wife, that may make sense.

I don't follow your reasoning - you think that one rental property is going to keep your wife so busy, it will be an equivalent of her working full-time?

If you are going to invest in residential rental markets you must either become an effective property manager or hire one. I suggest hiring one before you look for a property...you must interview at least 3 of his current owners he handles properties for and 2 that he is no longer managing for. Don't just decide on the rate they charge. Look at their ads etc. Call on one to see what kind of response you get over the phone...
Take the landlord to the property you are going to buy and have them critique it (what needs to be done to get it rented and for how much). Don't listen too or get caught up with a company that says they will handle your investment turnkey when it comes to SF rentals...I have a number of clients that have fallen prey to these slick sales people and they have lost 10's of thousands. [SOLICITATION REMOVED]
Good luck! Brad

Bienes right..Its a start and she's never worked full time. Or should I say, she's never been employed full time. Even though my dads gone, she's still busy with his and our families needs. Home cooking.. Taxi service for my daughter etc etc.. My dad had a cattle operation going before he passed and there's allot of loose ends still. Im busy with a bathroom remodel and other repairs. But things should slow down here. And then she can shift gears.

Honestly.. I don't trust anyone.. Iv been screwed over by friends.. Let alone a property manager. I have to be hands on.

Yea. I think that might be the best goal if I do. In fact Im working on a pre-nod at the moment but the owner is in denial I think.

I mentioned my son works for a GC named Tim. I like Tim since he gave my son a job he can actually learn and grow from. The CG's brother purchased a Single Family home in muscatine iowa which is a hour away for 13K, fixed it up, and doubled his money. Tim wants to do the same and wants me to be the bank. If I finance the project, what's that worth? I thought 50% 50%. I finance the project. Tim and my son will do all the work and then we split the profit when he's done. Am I way out of bounds with the 50/50?