College town condos - a good idea?

Question

My son is going to the University of Florida this fall. Although freshman must stay in a dorm their first year, I am looking at a 4/4 just on edge of campus now so he has a place for soph-senior years,which will cash flow well.

Anyone experienced in buying/renting in college towns? What problems have you experienced? Tips?  Trouble renting during summer months?

Thank you.

Simon Campbell · Answer

Individual room leases are absolutely the way to go.  Even if you have a group of friends who want to lease together, always give each tenant their own lease, just in case their friendship does not last the term of the lease.

As to pitfalls, Tim Breems makes a good point about checking for HOA restrictions/fines.  Since this is close to a college, I am sure there are other units in the complex that are under the same type of arrangement.

A great way to reduce the pitfalls is to be willing to invest another 8 - 10% of the gross income into hiring an experienced and highly recommended property management company. Make them handle your headaches - it can be worth the price in the end.

Account Closed · Answer

Here is a market report for Gainesville that I ran across. http://activerain.com/blogsview/3659300/gainesville-fl-homes-sold-report-for-february-2013  This is definetly a good idea.  You have the world's best tennant.  Go for it.

Account Closed · Answer

Check to see if the HOA can fine unit owners for noise complaints, littering, damage to common areas, nuisance complaints, etc.

When renting to any college student there is sure to be:
- Wild parties that get out of control
- Blaring music
- People coming and going at all hours of the night
- Screaming & fighting
- Someone puking outside from time to time

Count on receiving some sort of complaints from other unit owners or renters who are not students themselves.  If the HOA can fine unit owners for such complaints, these fines can rack up and quickly eat away your profits.

Also, make sure to thoroughly examine the most recent financial statements for the development.  Check how much is in the reserve account.  If reserves are low or non-existent, there is a good chance of a special assessment or monthly fee increase on the horizon.

William Donaldson · Answer

I recently purchased a 4 BR/4BA condo in my college town of Clemson, South Carolina.  I'm currently a junior and will be living at the condo beginning in August with three friends.  I will go from paying $530/month in rent to cashflowing several hundred dollars per month while "living for free."  I've already placed two tenants in there until August and have another moving in during May who will remain there until August as well.

It definitely helps that I am a student to fill the unit with trustworthy people.  But the complex itself is nice and on the low side of market rents; I believe it provides the most value.  The complex is mainly managed by one major PM company, and they are already 95% full for August and they guarantee each owner at least two tenants.  I will probably hold on to it for a few years after I move out and then sell once the price rises to its cap.

Xing Zhu · Answer

A friend of mine invests in a college town. He bought foreclosed SFRs
under 20K each and rented to students. His net income is more than 20% a year. He told me he bought homes without HOA to reduce the cost. Condos are not that profitable. APT buildings are probably better near a college. But when I looked around a university, I was not able to find any such buildings for sale.

George P. · Answer

first, go gators. i am a gator grad.

i love gainesville and would buy a condo there in a second. when i went to school parents were buying condos for their kids. i never understood why.... now i do.

Mike Jones · Answer

Kelly P, I do 90% of my business in a very busy college city of Worcester MA.  There are some big +'s to being in a college area.  Market rents tend to be higher, we lease our units for 12 months and get paid for 12 but they tend to be empty for at least a month in the summer (it's great, allows us to renovate).  The down side is your are dealing with 18-21 year olds that are getting their first taste of freedom.  I would strongly urge you to interview property managers in that area and make sure they have expertise in dealing with college rentals.  Good luck!

Kelly P. · Answer

Simon Campbell Even with HOA, it's real good cash flow. From what I have read, preparing individual leases for each "room" is the best direction to go.  I'm curious of the "hidden" pitfalls of college condo ownership.

Simon Campbell · Answer

In my experience, much of the success lies in a good lease agreement. Many college rentals are rented on a per room basis which can cause problems if the leases are not written well.

Investing in a condo is not going to be as profitable as a SFR or MF since HOA dues are a factor. Make sure you calculate this into your cash flow analysis.