students housings in Philadelphia vs section 8

23 Replies

my dear Philadelphia investors.

I have a question to all of you.  If we were to compare rentals for student housings in Philly vs section 8 tenants, what would you say are the pros and cons of each?

Thank you all in advance!!!!

Section 8: 

Pro: Payment on time / They have to keep up the place to preserve the benefit

Cons: Management of tenants and inspections. Section 8 tenants are sometimes wonderful, and sometimes really complicated hot messes. They might loose the program benefit, and you have to evict them. 

Students: 

Pro: Higher rent than neighborhood average because they want to be closer to campus, and cramp more people in a house. They cant afford or want to buy a house, so no other option than renting.

Cons: If you get the wrong students the will do a lot of damage. 

Hello From Philadelphia Eli.  Here are my thoughts on the pros and cons to college student rentals vs Section 8 in Philly.

1.  The Pros - Section 8...the rent is guaranteed (or at least the government's portion); Tenants know that Section 8 has a low threshold for noncompliance, so the vast majority pay their portion on time; in Philly it is a relatively simple progress to qualify your home for Section 8; There are a lot of Section 8 seekers in the city so, finding a renter shouldn't be difficult.  The Students...you collect the rent for the entire semester up front (again rent guaranteed); May be able to arrange a side contract with parents to cover any major damage that students cause to the home; During the summer break landlords have the opportunity to make repairs to the home.

2.  The Cons - Damage, folks will cause damage...sometime minor, sometimes major.  Not paying the rent and eviction is another con.  One con specific to student rentals is the high turnover.  Nine times out of 10 your place will be empty during the summer breaks.  If not, the students who rented in the Fall and Winter may not be the same students who rent during the summer.  You will have a lot more move out, move in activity. However, all this is the cost of doing business, so you must have a plan on how you will deal with these issue. 

I recently overheard someone saying that there is a glut of student housing nearby to Temple and that active building of student housing by the University is driving rents down and vacancies up. Does anyone know if there's any truth to it? Thanks. 

Garrett M., Pleasant Street Properties, LLC

Section 8 tenants can only be evicted for cause.  And the PHA can withhold payments for various reasons.  So, no, the money is not guaranteed to come every month.

Students can at least be kicked out at the end of the lease.  And you don't have to learn and comply with a lot of extra rules and inspections.

If you can get grad students, they're the best tenants, in my opinion.  And they will usually stay for several years (especially law students - my favorites).

Another group to target are traveling nurses.  They look for short term rentals, but sometimes end up staying, and they'll pay a higher rent for a short-term lease, and are great, quiet tenants.  I was approached by a company that places traveling nurses asking if I'd rent a unit or more to them as corporate housing.  Owner and I decided we wanted more control over who the tenants were, but there is a demand for this out there.   If your rental is a home with rooms you want to rent to roommates, perhaps you could rent the place to a nurse placement agency as corporate housing. 

Just a thought.

Originally posted by @Sue K. :

Section 8 tenants can only be evicted for cause.  And the PHA can withhold payments for various reasons.  So, no, the money is not guaranteed to come every month.

This x10!!! I had "guaranteed" Sec 8 tenants/money before...it's not. If the tenant doesn't pay their gas bill and the heat and/or stove are gas and you come due for yearly reinspection while the gas is shut off, you're not passing the Sec 8 inspection no matter how nice your unit is. If you don't pass, the Sec 8 money stops coming. The tenant didn't have $1100 to get the gas turned back on and I damn sure wasn't paying it. Ended up evicting her 3 months later at great expense. No help from Sec 8 with any costs including repairs. 

I'm not firmly for or against Sec 8, I'm just saying you must be aware that it's not the "guaranteed" money people say it is. 

Originally posted by @Garrett M. :

I recently overheard someone saying that there is a glut of student housing nearby to Temple and that active building of student housing by the University is driving rents down and vacancies up. Does anyone know if there's any truth to it? Thanks. 

I was talking with a local Philadelphia landlord last weekend and he has 6-8 Temple rentals he bought ~10 years ago. I asked how it was going and he said it was OK but wouldn't buy there now. He's looking elsewhere for his next property for the exact reasons you mentioned above. I think that area is hyper-inflated and the bubble will pop sooner or later. 

The reason Temple is building more and more student housing is because they are enrolling more and more students each year. I wouldn't buy the hype about an oversupply of housing just yet. If a big institution like TU is investing large sums of money in construction, there must be a good reason for it.

Originally posted by @Troy S. :
Originally posted by @Sue Kelly:

...

... The tenant didn't have $1100 to get the gas turned back on and I damn sure wasn't paying it. Ended up evicting her 3 months later at great expense. No help from Sec 8 with any costs including repairs. 

...

We're you enrolled in the PGW Landlord Cooperation Program (LCP)?  If not, you could end up stuck having to pay that gas bill ...

Originally posted by @Max Tanenbaum :

The reason Temple is building more and more student housing is because they are enrolling more and more students each year. I wouldn't buy the hype about an oversupply of housing just yet. If a big institution like TU is investing large sums of money in construction, there must be a good reason for it.

 Agreed, not saying there is an oversupply...yet. My point is that it's like musical chairs. At some point, the music is going to stop and someone is going to be left without a chair. Is that this year? 5 years from now? I have no idea but, at this stage of my investing career, I have to be very careful with each move I make. That's why going into what I personally feel is a hyper-inflated market is a risk I'm not willing to take.

While this is a bit off-topic, I also feel that higher ed is simply big business and the cost of college vs. the rewards (or lack thereof) will result in a correction in that industry one day. Lastly, it's still dangerous around there and I don't want to own anything in an area I personally wouldn't live in. Not sure how well you know the area but it's sketchy, even in the "better" areas, and I live in Brewerytown which is still plenty sketchy :)

Temple student housing looks quite saturated after the construction of "The View at Montgomery."  I didn't do a analysis by the numbers but to me Temple student housing looks to be overbuilt.

Originally posted by @Steve Babiak :
Originally posted by @Troy S.:
Originally posted by @Sue Kelly:

...

... The tenant didn't have $1100 to get the gas turned back on and I damn sure wasn't paying it. Ended up evicting her 3 months later at great expense. No help from Sec 8 with any costs including repairs. 

...

We're you enrolled in the PGW Landlord Cooperation Program (LCP)?  If not, you could end up stuck having to pay that gas bill ...

 This was in South Jersey, they had no such thing but you also weren't on the hook for it either. They did try to get me to pay it and there were lots of hoops to jump through when the new tenant moved in to prove we weren't just reinstating for the same tenant under a different name.

Regarding the LCP, I'm absolutely enrolled in it! While I dislike the fact that they have recourse to lien your property for someone elses negligence (if you're not enrolled), I do like that they'll share info on the account with you, let you know if services are being turned off, etc. It's a bit of a double-edged sword. 

Based on enrollment data one would think that there isn't an oversupply .... TU's main campus has a total enrollment of about 31K students, 26K or so being undergraduates ... 

Temple provides enough on campus housing for about 5600 Students ... leaving about 80% of the student population to choose between off campus housing or home  .... 

source: http://www.temple.edu/ira/documents/data-analysis/Fact-Book/TU_Fact_Book_2013-2014.pdf

Temple's market is interesting because clearly there is more then enough demand to meet current markets supply. But it's strange because having property in the market myself .. I've seen rents  drop a good amount in the past few years ... just unsure as to why rents are dropping year after year ...

For anyone looking to invest in temple's market I'd say there is still opportunity but this market is very competitive - perhaps the most competitive market in the city  ... just my 2 C's.

Originally posted by @Carlos M. :

Based on enrollment data one would think that there isn't an oversupply .... TU's main campus has a total enrollment of about 31K students, 26K or so being undergraduates ... 

Temple provides enough on campus housing for about 5600 Students ... leaving about 80% of the student population to choose between off campus housing or home  .... 

source: http://www.temple.edu/ira/documents/data-analysis/Fact-Book/TU_Fact_Book_2013-2014.pdf

Temple's market is interesting because clearly there is more then enough demand to meet current markets supply. But it's strange because having property in the market myself .. I've seen rents  drop a good amount in the past few years ... just unsure as to why rents are dropping year after year ...

For anyone looking to invest in temple's market I'd say there is still opportunity but this market is very competitive - perhaps the most competitive market in the city  ... just my 2 C's.

 I'm sure a decent amount of the student body commutes in. To make sense of enrollment vs. student housing demand you'd need to know how many students are commuters. 

@Troy S. agreed and that is the disconnect ... a lot of students are commuting ... however that may change once the football stadium gets built.

wow, thank you all do much for such thorough answers. Based on the information I received above, I guess as a beginner investor I should start with section 8 tenants. But even that seems to be very competitive as well. I'm getting suggestions in  19135(tacony)  and 19124 (oxford circle). 

Any ideas about these areas ?

Once again, thank you all in advance

I like 19135 better because it's cheaper and on the MFL. Tacony is a more stable area. 

Regarding Temple housing, I needed to visit a client in Kensington this last week and took the drive from Farimount down 18th and took Cecil B. Moore all the way down. I was surprised how many houses have banners on them advertising rent. Seems competitive from an outside view. 

Also rode around North of there up to Sedgeley Woods and there are an astonishing amount of empty lots and shells. 

Originally posted by @Carlos M. :

Based on enrollment data one would think that there isn't an oversupply .... TU's main campus has a total enrollment of about 31K students, 26K or so being undergraduates ... 

Temple provides enough on campus housing for about 5600 Students ... leaving about 80% of the student population to choose between off campus housing or home  .... 

source: http://www.temple.edu/ira/documents/data-analysis/...

Temple's market is interesting because clearly there is more then enough demand to meet current markets supply. But it's strange because having property in the market myself .. I've seen rents  drop a good amount in the past few years ... just unsure as to why rents are dropping year after year ...

For anyone looking to invest in temple's market I'd say there is still opportunity but this market is very competitive - perhaps the most competitive market in the city  ... just my 2 C's.

Carlos you are on the right track but you did not factoring in private off campus housing.  There is a ton of off campus housing and the View at Montgomery was just built which has a lot of units.   I would advise anyone looking to buy in this area to do some research on the student housing inventory and demand.

I get worried for new investors, or people that are not familiar with the area because if you look on Craigslist or even the MLS you will see deals marketing that they are by Temple but in reality they are many blocks away from where most students would feel safe renting. If you buy one of these "too far from campus" properties you will have a really tough time making any money and it will probably end in disaster.

I have first hand experience with this area because I go to Temple part time and talk to many students about this subject.  I also get all the alerts of robberies and such things on and around campus from Temple's text service.  Trust me, there are a lot, and most students know venturing too far from campus is asking for bad things to happen.

@Eli M. Tacony is a great area for buy and hold properties.  The demand for rental units in the area is strong and the sales price is reasonably low.  Tacony also has great transportation with I95 and the Boulevard both nearby.  

I work with a few investors in the northeast, and most of my business is based on these areas so if you want more information or assistance feel free to message me or call.

Originally posted by @Carlos M. :

@Troy S. agreed and that is the disconnect ... a lot of students are commuting ... however that may change once the football stadium gets built.

Sorry Carlos, but I don't see any connection between a football stadium on (or near to) campus and the choice to commute. Public transit to TU is pretty solid; regional rail stop is just a few blocks from campus, and the subway stops right at campus. Regional rail serves suburban commuters, and the subway serves any city resident. So a lot of the demand for housing nearby stems from out of state residents and PA residents with home too far to commute. Sure, some students with homes close enough to commute want to live away from mom and dad. But again, the football stadium won't change that housing situation all that much if any IMO. Especially since the typical TU student does not attend football games. I am a TU grad BTW, and lived close enough to commute, and knew lots of students who lived even further than I who commuted ...

@Ryan Fagan - you are correct in the crime and proximity to campus. It's interesting that a TU student can live just a few blocks from campus and be in a really bad neighborhood in North Philly, or move further south and be a commuter and live in a safer neighborhood. I'd prefer the latter. 

@Ryan Fagan appreciate the post ...  Didn't want to get into at the details here but agree there is a ton of off campus housing - I to have first hand experience with the market, remember when a bed room in a row home off campus in Yorktown was fetching 850 per month (those days are long gone) ... But don't want to go to far off track here, temple is a very competitive  and fickle market any investors out there please do your due diligence  before making any purchase.

@Steve Babiak definitely understand your opinion here ... guess well have to wait and see how the stadium impacts campus life - if it happens of course :)

Would appreciate Philly folks' thoughts about the Pros and Cons of Overbrook neighborhood?  N. Peach St to be exact.  Quality of neighborhood, rental demand, whether the distance to city should be a concern, etc.  Any and all thoughts are welcome.

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