University apartment investment

6 Replies

Considering a condo or apartment investment property in the university area of Raleigh, NC. any advice on pros /cons compared to SFH?

@Michael Hill ,

Any particular reason you are looking at that specific investment?

Pros: very low vacancy, decent cash flow, low entry price, not responsible for exterior maintenance

Cons: student tenants, lots of turnover, higher HOA fees, not as much appreciation

I own 3 student rentals and manage a few more.  They are great cash flow machines and have experienced appreciation, but I bought the last one in 2015.  Going forward, I am not sure how much appreciation will happen given that right now they are at all time high prices.

Generally I like having mine and have held onto them. They are pretty low maintenance since the HOA maintains the exterior. All I have to worry about are the appliances and the HVAC/hot water heater. They are very easy to rent since the rooms are about $400-$450 each and attract a variety of tenants - mostly students, but I also have tenants who are young professionals, recent grads paying down student loans, etc.

Let me know if you have any specific questions I can answer.

Hi , a few reasons I am looking at this area . I sold my first SFH rental property which I lived in initially , so it was not purchased for the sole purpose of investment. However it did well overall. Now I am looking for my first true rental property and think this a good low risk entry with good cash flow. I know about the high HOAs , but don't think that is a huge negative. Polling to see if I am missing anything major in my analysis. Were you successful managing yourself or did you use a property manager ? If I manage myself I would be doing so from long distance which I am hesitant about. The last property I had, I used a property manager , but they did very little because the tenants were reliable and the property pretty much ran itself.

@Michael Hill I can't offer a ton of advice on the pros/cons on condos vs SFH (other than obvious like lower maintenance but has an HOA). I agree with what @Tiffany Alexy says on all of that.

I can say that's in my experience that the success of a student rental is highly dependent on the management. Even more so than the "average" rental property. 

Dealing with the complexities of students, parents, timing and the local student rental market is very difficult. Most people that I know that I have tried student rentals either have done really well or it was a disaster and sold quickly. Not a lot of in-between. 

This post may be of some benefit to you if you're considering getting into that niche:

@Michael Hill ,

I managed them myself for a number of years, but I'm local and a real estate agent/property manager by trade, so YMMV.  If you're out of state, I think it makes sense to have a property manager on the ground just in case.  Properties *can* generally run themselves, but these units typically don't, as there is usually turnover to manage, not to mention student tenants.  

Of course there's no hard and fast way, and you can always change your mind! 

@Tiffany Alexy what do you consider "high" HOA fees, $100, $200+/ mo? The pros you mention above are what attracts me to this niche as well. Stereotypically I think students are harder on properties so turnover can be more expensive, in your experience is this true and if so how much more would you suggest budgeting for turns vs non-student rentals.

@Nathan McQueen ,

Definitely $200+ a month. It depends on the specific community, but generally student housing is more condos/townhomes which have higher HOA fees compared to single family homes (some of which have none).

Yes turnover is pretty consistent on an annual basis.  Most of them are getting new paint and new flooring each year ($2K-$3K), compared to single family rentals which hopefully gets tenant occupied for a year +.  Of course they could always move out after a year, too.

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