I am looking to purchase a home in a college town and rent individual bedrooms to college students. I think that I can be profitable in doing this because I will be able to beat out all of the apartment rates in the area. The property that I am looking at on Friday is a 3 bedroom 1 bathroom. I have been looking into 3 - 4 bedroom 2 bathrooms but cannot seem to find one at a good price.
The market is booming right now in the area that I am looking to purchase, and people are offering more than asking prices on properties. My concern is that there is only 1 bathroom and I would have 3 tenants. I'm not sure that this would scare me away if I was a college male, but I'm not sure if I am being bias because I like the property. Can you all give me some input on this?
A little background on the property. Asking 80k, comps are selling for between 87k and 98k in the last 3 months. Large living room and large 'study'. Kitchen appliances may need to be updated. Large back yard w/ storage shed. Stone drive from main road (150yds) and stone driveway. 4.5 miles from the school market that I will be targeting. New roof 05/14. I think I can get 425 per tenant maybe 450 for the master b/r.
I know plenty of college students that have shared a dorm with three people to 1 bath. It's not optimal, especially for female students, but its workable. Guys typically don't mind.
That said, 4.5mi to the campus is a bit of a distance, at least it is to me. I'm not familiar with the area, but it seems that tenants would need some form of public transport near by or a car.
I was looking for something within 5 miles. I'm assuming that they would have a car. The drive is only about 10 minutes. I was not expecting that to pose an issue. I would love more feedback on this as well.
It really depends on a few factors: 1) neighborhood dynamics 2) climate 3) bus route.
I am the president of the Housing Corporation for the Fraternity which I was a part of during undergrad. Our housing structure is 3.2 miles away from the University. Potential tenants are detoured from living in the house due to this distance, because walking would be a hour each way. Additionally, riding a bike is out due to the neighborhood being on the fringe of lower socioeconomic area. The University is located in the Midwest and our climate is not great during the winter months. The saving grace is that the university has a bus that runs on the hour to several locations west of campus. Unfortunately, our house does not sit on the bus route which limits some of our fraternity members without cars. We are looking into getting our own bus service as the University feels our location is just enough out of the way to adjust their route.
My point is, take in to consideration whether the university or college has a bus route and if you are looking at those distances, make sure you are on that bus route.
Just looked into it. It appears that this property is 0.1 miles from a bus station and the bus ride to the school is approx 30 minutes w/ stops.
I say go for it! You can easily add a second bathroom to your building and 2 bathrooms is much more attractive then 1 bathroom. I have seen lots of houses turned into dorm style buildings with additional rooms such as dining rooms and living rooms being turned into spacious bedrooms for rent so you may even be able to expand your 3 BR 1 BA into a 4 BR 2 BA to optimize profits.
30 minutes to campus isn't bad at all and students can study on the bus on the way to class. Make sure that parking is available on the property or the street so students can drive if they want/have to.
Also make sure the the bus transports frequently enough that the students can get to classes in reasonable time.
I like the Idea Cory. The thought had occurred to me, although I'm not sure that it would be cost effective. My father is in the handyman business and suggested that it is quite expensive to add another bathroom. Do you mind giving me an idea on this? He mentioned 10k, which I do not have to toss around. I am assuming that there might be about 5k of repairs on the property (high balling). I'd like to close before the end of August and have a tenant by September. My concern is that if I do not have tenants lined up by mid-September, I am going to be SoL until the following semester (December).
Which school is it? If the college is in a urban area 4.5mi is very far because most people at urban schools walk to where they need to go. However if the rent is cheap enough people will flock.
If the college isn't urban its not too bad, but also ask yourself would you be able to rent it out and profit from someone who doesn't go to the college, and lives in the surrounding area.
Also don't worry about the bathroom thing unless all your fellow landlords are offering two bathrooms. Then you would have to adjust your asking rent.
Thanks for the input Marcus. The school is called University of North Texas. I wouldn't consider the area urban, however, there are a lot of apartments and businesses near the university. I went there and I lived about 4 miles away and drove, although there was a bus service option. I would definately be able to rent it to non-college tenants and make a profit, however I think it may be lower if I rent it as a single family home.
Can anyone give me some good ideas where I could market to non-college tenants? I am still very new to the game.
Are you buying around the Plano area? If so, then 3/1's come with a lot of stigma, and need to be purchased at a significant discount. They are considered functionally obsolete around here. This isn't the case in many areas of the country (like the midwest), but here you've got tons of 3/2's. The reason you are seeing such a good "deal" on it is that they are undesirable and have smaller pool of buyers. Also, I have rarely seen it be cost effective to add a bathroom unless you're dealing with a pier and beam house with some plumbing already in place. I wouldn't pay anywhere close to $80k when comps are 87-98K. Just my two cents.
Nice to hear from another Dallas investor. I am looking at the Denton area near UNT. Thank you for the insight into the Plano market. That may come in handy in the future. Do you have experience in the Denton market that you could pass on regarding a 3/1 setup?
@Travis Hintzel undefined Yes, my comments on 3/1's apply all across the DFW metroplex, including Denton. Again, I'm not saying you can't make money with them, you just need to buy at a really cheap discount.
Your comment about how hard it is to find 3/2 and 4/2's at a good price reminds me of something I read in one of Trump's book, "The Best Real Estate Advice I Ever Received," where he interviews a bunch of other investors. The line was something like, "Quality looks expensive today, but cheap tomorrow." 3/2's and 4/2's are what everyone wants and are likely to continue to remain in demand in our area.
The key to building a cost effective bathroom is to build by the existing plumbing fixtures. I am assuming its a 2 story building since its 3 bedroom so if the bathroom is in on the first floor you can try to build a second bathroom in the upstairs directly over the existing one or vice versa if the bathroom is on the second floor. This way you don't have to rip out too much stuff to add plumbing fixtures.
If you have a basement you are in luck because you can build the second bathroom directly where the plumbing fixtures are. all you have to do is get a cement saw to cut out a hole for the toilet to reach the sewer line. Its not a big job if you know what to do and hopefully your dad can help you. I have done this myself. I paid 500 to have some one add the sewer pipe and then it was just the costs of framing, drywall, paint flooring, shower, toilet, and sink. I paid just under 2k total but did most of he work myself.
If your space is limited try going for a half bath with a toilet and sink.
Also you mentioned a large yard. Perhaps you could add a second bathroom by building outside next to the existing bathroom. You will have to pay more for costs for siding and roofing but if you can do it yourself the costs would easily stay under what the costs would be to add plumbing fixtures.
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