First time investor/home buyer. Need some quick advice
OHS · St. John's, NL · Member since 2015 · 5 posts · 0 votes
Hey everyone,
Long time listener to the podcast. New to the forum. Lots of questions and knowledge to learn.
So really quick, I'm in the market for my first rental property. I've almost 100% set my sights on the student rental market. The city has a number of large colleges and universities, of which are surrounded by neighborhoods of around 40-60 y/o houses.
The market is (what I and many others believe) highly inflated, so just for context, a 60 year old 2 story/2 apartment home in the school area is ~250+. Rooms can potentially rent for 300-450 each.
I'm GOING TO MAKE THIS HAPPEN, so I'm just looking for some words of wisdom. Does anyone have a quick hitlist of what I should be looking for in a student rental. Or should I look for a live in rental (live in the basement and rent the upstairs) I'm approved for 300K @ 5% down. I'm single and work 2 weeks out of the city with 1 week off in the city.
Oh man, you have a bad case of gottadoadealitius. You're thinking about paying $250K for a property that, if I understand your numbers, will generate $900 a month in rent? How deep are your pockets, because that is going to be deeply cash flow negative. If that's the sort of deal you can find, don't buy anything. Go further away or invest in something else, because a deal like that is a stinker. The goal of RE investing is to make money, not just to own real estate.
Oh man, you have a bad case of gottadoadealitius. You're thinking about paying $250K for a property that, if I understand your numbers, will generate $900 a month in rent? How deep are your pockets, because that is going to be deeply cash flow negative. If that's the sort of deal you can find, don't buy anything. Go further away or invest in something else, because a deal like that is a stinker. The goal of RE investing is to make money, not just to own real estate.
Sorry, I may not have explained myself in full.
A few of the houses I looked at so far are:
That's $1200 - $2700 of rent per month.
My gottadoadealitius is more of, I'm going to make this work. Others in this city are doing it so I'm not letting anything get in my way. The right home, the right deal. I want to be ready for when it comes around.
@Rob Murphy Welcome to BP! Thanks for posting about your first potential project.
@Jon Holdman is right, the goal is more than acquisitions.
I felt the same way when I stumbled upon this sector - I was pretty excited reading about a lot of the success stories, and I felt a certain sense of urgency, almost like I was being left behind while everyone else was scooping up piles of cash!
And because I wanted to know how to do this, I started to read - a lot, maybe a few thousand posts, and a few heavy books. And because I wanted to Not Lose All Of My Money™, I started to read between the lines, and I started paying attention to the horror stories, of which there is no shortage, unfortunately. I really forced myself to read the other side of the coin, and not just the positive parts. It's really hard to do this, but it's a required skill.
I feel we are in the last (long) phase(s) of an REI bull market, and I feel that patience is the best course of action right now - for buy-and-hold and a lot of other strategies. Some things can work - aggressive, disciplined, low-margin and data-driven wholesaling, for example - things that are more insulated from today's (irrational?) market volatility.
You say this yourself: The market is (what I and many others believe) highly inflated - so why the need to dive in now? Why not take this time to build a network, educate yourself and watch from the sidelines, and then scoop up some nice MF and apartments on the cheap when the inevitable market-correction comes thundering into town?
This forum is the best source of real REI info on the planet. Take advantage of it. Lots of folks here are smarter than anyone I have ever met, anywhere in the world. Read the stories - good and bad - and take your time.
You *will* make it happen!
Keep us informed of your progress!
Paying $250K for $2700 in rent is OK. If you're managing yourself, you'll make money. With a property manager, not so much, but you should be positive. Paying $250K for $1200 of rent is a very bad deal for cash flow. Might be a speculation play, but you will be out of pocket while you hold.
I looked at college rentals for a while. For one, your tenants are pigs. Men, women, doesn't matter. Every property I looked at was a disaster area.
Depending on your school's schedule, you may be able to count only only 10 months a year. You will have turnovers almost every year. Which incurs all the cost of a turnover.
Be sure you're in compliance with zoning and building codes. Where I was looking, doing what you want would be OK within areas up to about two blocks from campus. Further out, you're violating zoning. And the zoning folks said that complaint landlords did call and report non-compliant landlords.
I'd tend to go with @Rob Murphy and not procrastinate on this. It's never "the right time to buy". The time to buy is when you can as long as the numbers work and the deals make sense.
Rob, I'm not familiar with "NL" - is that "NetherLands"? I'm not aware of any US state having that abbreviation.
The only major caveat I've ever heard about student housing is that you need to keep a large maintenance reserve. Parties can be hard on the properties.
Thanks Doug. (sorry guys, I dont know how to mention with the @. Yes newbie.) I'm well into a number of books now. And about 4-6 months into learning about investing/real estate.
Rich Dad Poor Dad changed my view on everything, but if you have any other book suggestions please let me know.
My goal here is not necessarily to amass an exorbitant about of money. It's to not have to worry about providing for my (future) family, and not live in an existential world of worry/fear of money like I did growing up. My real estate will be treated seriously as a business, investing rental income into rehab cost accounts and down payment accounts for future properties.
David, I'm in agreement. The market here is inflating by the day. We have huge oil discoveries offshore, very large construction projects, and housing prices are on the up and up. BTW, I'm living in Newfoundland Canada.
Depending on your school's schedule, you may be able to count only only 10 months a year. You will have turnovers almost every year. Which incurs all the cost of a turnover.
Be sure you're in compliance with zoning and building codes. Where I was looking, doing what you want would be OK within areas up to about two blocks from campus. Further out, you're violating zoning. And the zoning folks said that complaint landlords did call and report non-compliant landlords.
It's common practice/a given when renting as a student to sign into a 12 month lease. August to August. So even if tenants move out of province from April through August, my intent is to have them pay rent indefinitely.
As for turnover, if I decide to go this route, I will be confirming rental/lease agreement for the following year very early (February or April). If the lease is to cease, I will begin searching for new tenants immediately.
Just a few clips from this year.
"For a two-bedroom unit — about half of the 3,500 units surveyed — average rent is $904 in St. John's, up from $877, and in the CMA rent has gone from $864 to $888."
"The new product coming onto the market, on average, is $1,500 a month or higher for two bedrooms,” he said, pointing to Chelsea Place near Quidi Vidi Lake, and noting a planned apartment complex on Ladysmith Drive. “So that’s skewing that average slightly. … We’re not going to see rents come down because of the new product coming to market. … That’s going to have an upward effect on average rents.”
My last apartment was $500 per room in a two room, very small apartment complex. I know my talk/info seems very biased, but I feel strongly for the growth of this area.
Hi @Rob Murphy (type "@" and start typing the name of the person and look at the bottom of the chat window. A picture/name will pop up you can select to mention them...)
I think I have a similar condition as you. I'm ready to get in the market in Sudbury, ON, but prices here are also inflated. I can't seem to find a property with good numbers in a good location. I have relatives in St. John's and have heard that things there have been pretty expensive for the past few years. It seems that the RE market in Canada is inflated in general, and that getting good cash flow can be tough, but I guess that's why not everyone is a real estate investor! At first glance though, it sounds like rents of $2700 generated by a $250,000 property that doesn't need much work upon purchase might work well. I'm not currently an actual RE investor though, just my 2 cents!
There are some people I have talked to on BP that specialize in student rentals and they have been quite generous with their advice. Maybe @Justin H. or @Roy N. would have something to add.
Best of luck getting started!
Dea
@Dea Chu thank-you for the shout out.
@Rob Murphy - Welcome to BP! how are things out on the eastern edge of the continent?
In which areas are you considering properties: Rabbit Town; Glenridge, Townshend, Mt. Cashel?
The per-room rent numbers you give are on-par with what is happening in Fredericton, Moncton and Halifax. If the development you reference out by Quidi Vidi Lake is actually aimed at students it sounds like the "luxury student living" developments that have been taking place in a few other university cities.
Thanks to the further economic polarization of Canadian society, a, perhaps larger, subset of today's students are going to university with largess in the financial support department and will pay 1100 - 1500/month for a 2-bedroom (each room with its own bath). That said there is still a good market for the 3-5 bedroom (depending on zoning) student house/apartment or a student rooming house with furnished rooms.
We've been dosing student rentals for a few years now and our strategy seems to be working - we are full, despite the rise in vacancies among older properties as a result of new units coming on-line and the decline in university enrolment.
The points I would raise initially are:
As you progress in this venture, feel free to reach out with questions or ideas. Providing homes to students can be lucrative {and without the Animal House horrors}, but it is a different rental market.
@David Dachtera NL (formerly NFLD) stands for Newfoundland & Labrador - Canada's youngest province, but home to some of its oldest settlements and friendliest folk.
Welcome to Bigger Pockets community. Be sure to check out “Learn” for all kinds of useful resources and free how to guides.
Welcome to the site @Rob Murphylooks like the numbers work so far. I would recommend actually hiring a property management company if you can. Dealing with tenants can get overwhelming especially at the beginning stages when you are looking to grow
And Rich Dad is a great book and glad you came across it
@Dea Chu - Thanks for the recommendation – Rob I have 2 student rentals in Southern Ontario (St Catharines).
Maybe something that would make sense for you to start is buy a current student rental?
If you want to start on your own:
For example, I paid $195/$209 for my 2 homes here, and have one 6, one 7 bedroom, both 2 bath homes.
The $195K needed $15K in rehab and $209, about $1K in paint. so call it S210K each.
House #1 Gross Rent – 6 rooms $425/piece - $2,550/mo
House #2 Gross Rent – 7 bedrooms 400 basement – 425 up - $2,875
We offer unlimited wifi and clean and bright homes (even though one home is 90 yrs old, the other is 30 the interiors and offerings are the same).
I say aim to be the best and you will get the best.
Thanks @Justin H., I just sent you a message before seeing this post.
But just to address your comments. The going rate for student rooms around here is 400-500 (ball park). I rented as a student/working professional with roommates for about 10 years, moving every year or two, so I have a pretty good grasp on local rates.
Are your houses split level (two apartment homes)? I would be weary of renting a 7 bedroom house, thinking it would turn into a party shack. The majority of the apartments around these parts are 3-4 bedroom.
Also, 99% of the student apartments are POU. If you come across an apartment with wifi/utilities included, you might have died and gone to heaven. This is just a given around here.
I have a couple houses evaluated and the profit from each house (after taking into account estimated insurance/rehab/etc) is anywhere from $500-700.
@Rob Murphy - Both homes have separ
Separate kitchens and baths up & down. Up/down access is locked so it appears as 2 different units, and not 1 complete gongshow lol.
You will need to check St. John's by-laws w/r to occupancy. It is not uncommon, particularly in university towns, to find occupancy limits on the number of un-related adults per dwelling unit. Here (Fredericton) there is a by-law limit of 4 unrelated adults.
This would place any house of >4-bedrooms into suspicion if it where to be rented to students. If zoning permits duplexes, you can divided the house into two units - each with there own common areas (kitchen, bath, etc). Doing so will bring in the requirement of proper fire separation between the units ... in many/most jurisdictions simply having a second kitchen w/ a range in (say) the basement necessitates fire separation between floors.
Yes, there are many landlords who skirt these requirements and get away with it ... until they don't.