Student Housing Unit- Cash vs. Finance?

Question

Hey Everyone- Brand new to Bigger Pockets.... Making my first post about a 3 unit student housing apartment I'm getting ready to close on in New England. Currently have two vacation rentals and an ADU that are operating nicely. After determining my why.... through much learning & research I have decided to niche down to student housing. I feel this a great fit for my long term goals. I'm in a position to pay cash for the building or have some decent finance options for a 15 year fixed or a 30 yr with a 7yr ARM that I would structure to payoff in 15 with a 60% LTV. I'm curious what the groups opinion is on leveraging the property VS cash, knowing I would be looking to make other deals in the next 2 years or less.

I would also be interested in linking with a meetup group in the New England area.

Thank you all for your time!

~Justin

I would also be interested in linking with a meetup group in the New England area.

Thank you all for your time!

~Justin

Kevin Hilton · Answer

Justin Webber, congratulations on your success!  The idea of purchasing student housing in cash sounds great, but what kind of numbers are we talking about?  How many doors in that 3 unit?  Is that one apartment with 3 bedrooms or 3 different units with 2-3 bedrooms?  For me, if the units would cash flow enough for me to purchase another student rental within 2 years then I would pay cash.  If I would not be able to save a 25% down payment in that 2 year period then I would probably leverage the 15 year fixed and look to buy an additional rental or two with that cash.  Another piece of the equation would probably be how old are you and what are your goals in the student rental niche?

Kevin Hilton · Answer

I know this may be contrary to many on BiggerPockets, but with those numbers I would go ahead and pay cash for those 11 doors.  Within 2 years you should be able to add to your portfolio with that NOI.  I would think within 7-10 years you would be in a great position to control your time. Those are some pretty expensive student properties.  Is that in an urban area?  The market I invest in is usually anywhere between 50k-75k purchase price with rents ranging from 1500-2200.

Justin Webber · Answer

@Rene Doyle

Sorry I just saw this.  There are only 2 single rooms.  The rest are doubles.

Rene D. · Answer

@Kevin Hilton it's 11 beds vs doors so I'm guessing some rooms would be shared?

Just curious, what is the unit mix?

Justin Webber · Answer

749k Its 3 units with 11 beds.  Conservative 50k NOI before debt service.  Mid 30's.  Long term family hold for my children.  Grow enough to gain control of my time.

Student Housing Unit- Cash vs. Finance?

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