Rental Property Investor · Salisbury, MA · Member since 2019 · 17 posts · 6 votes
Hi all!
I'm trying to get into real estate and all of the resources I've been reading/listening to have said some of their best advice was learning the market. I was looking in areas where property was reasonably affordable in southern Maine but then I had a thought.
I am a recent college grad and I know the neighborhoods of my college town about as well as the town I grew up in. The more i think about it, my alma mater is growing steadily over the past 5 years, there is a constant inflow of tenants, and real estate prices appear to be incredibly reasonable.
However, I am typically an optimist and when I get into these modes I have a hard time seeing the bad side. So to any investors in college/university neighborhoods, what have been your largest/most consistent challenges? Is it just high turnover and possible damage? Or is there more I am struggling to see?
We like investing in college towns that have additional economic drivers beyond they university. We also target not undergrads/students as most of the attention in those markets is towards students.
We've found that the market rate rents float higher in college markets compared to non college towns because of the upward rents of student housing that are charging by the bed vs by the unit.
We like investing in college towns that have additional economic drivers beyond they university. We also target not undergrads/students as most of the attention in those markets is towards students.
We've found that the market rate rents float higher in college markets compared to non college towns because of the upward rents of student housing that are charging by the bed vs by the unit.
Ben, I have done a lot of evaluations of multi-family properties in more rural areas in Central Maine including towns like Farmington/Orono and In my mind, those are the places to invest. still have low vacancy rates/ low price per unit, trading at good cap rates ect. ya lower rents than Portland, South Portland but the frenzy down here is not worth it as an investment right now. Honestly from what I have seen/heard Farmington is sort of sleeper in that regard, a lot of private sales/deals happening there over recent years
One thing to consider from your risk management/insurance side is it is more difficult to obtain insurance. There are few companies out there who have an appetite in general for habitation. Then add on the additional liability for the students, there are even fewer.
What you can expect when getting insurance for student housing is increased premium costs and fewer companies (even through brokers) who are willing to give favorable coverage for the landlord/owner.
Thank you! Yes I did some searching in the Portland and Biddeford areas but I haven't been able to find many properties that make the numbers work. I'll look into Farmington, thanks for the tip!
Thank you Spencer for the reply. I will look further into the downtown aspect of Orono as I had not considered that. There has been significant change in the area including nearby Bangor. I appreciate the support and the advice!
I am about to break ground on a project in Orono. It's a single family, very close to the campus and will be use initially as student housing. My kids will be living there while attending UMO, with the first one starting this fall. With one (and later two) of the bedrooms occupied by my kid(s), the landlord-tenant dynamic will be a little different (I will be, in part, both the landlord and tenant). One of the things I've learned that's worth passing on, at least specifically to the cities of Old Town and Orono, is that those cities limit the number of non related people living together to 3 per residence. That limit of 3 paying tenants per unit makes it harder to make the numbers work, unless you're thinking multi-unit buildings. Orono also has a few additional permits that I hadn't run into before. There is an annual rental house permit, and a one time student housing permit that must be obtained. The area shows strong support for traditional and short term rentals, so if we find the student side of the market doesn't fit well with our operation we have options. Specific to the short term market, I'm also wondering if a shorter student lease (Aug though May) and AirBnB (Jun-Jul) can coexist.
@Ben Theriault I graduated from and invest in the UMaine area. The biggest thing I noticed when doing my deal analysis is that the "rules of thumb" don't really apply in this area. 2% rule, 50% rule, etc. The biggest reasons for this: 1. Taxes are relatively high compared to the average US tax 2. Turnover is more common 3. Utilities are often covered by the landlord, especially heating which is a major expense. I've found that when looking at properties quickly it's safer to assume 60% of rent will be expenses (prior to factoring in mortgage payment -principal and interest-). Also, the housing stock is extremely old, so I anticipate having higher CapEx costs.
Hi Ben. I have 2 single family houses in Buffalo by colleges and 1 in Brockport NY which is a college town. These 3 are my best performers. The challenges are that you need to start showing the place earlier than normal rentals. I’m already placing adds for the fall semester now. Also make sure you have them pay a deposit and sign a lease right away because they will usually keep looking. They usually don’t understand what signing a lease and paying the security means. Also I make them have their parents co-sign if they plan to make monthly payments and are not paying the entire rent for the semester thru a loan.
As far as damage goes, they’re not any worse than my other properties.
Thanks for the info! Glad to know up front that Old Town and Orono have those requirements. I'll look into if Veazie has those same requirements as well
Do you find it worthwhile to look into housing fairs? Some universities have these. I'm not sure if they are solely saved for larger conglomerates and complexes or if they'd let in some smaller investors.
I’m looking into the Albany area to purchase my first property. I graduated from here a couple of years ago and it is a big college town. Downside is, it is a big house party town as well.
I'm searching on the MLS and i see a few foreclosure homes going for cheaper than other homes, which I would obviously have to Rehab.
Since you are in the upper NY region, what would your advice be if a home was going for 35k 3bdr/1b with full rehab? Would this be a smart investment in your opinion? Should I look for a cheaper property?
I would obviously have to get creative with financing, but I do believe there is potential in this market with student rentals
Ben. I’ve never heard of housing fairs for off campus private landlords. That might be for housing the college owns. I would think it would be a liability for the college to recommend a private residence. I know the University of Buffalo built a bunch of townhouses that look like private homes but the university owns them.
Julian. I would be careful with a full gut on your first rental. Unless you’re in the construction industry and you really know what you’re doing. It might be worth it to find something a little more ready to go than a full gut.
I'm trying to get into real estate and all of the resources I've been reading/listening to have said some of their best advice was learning the market. I was looking in areas where property was reasonably affordable in southern Maine but then I had a thought.
I am a recent college grad and I know the neighborhoods of my college town about as well as the town I grew up in. The more i think about it, my alma mater is growing steadily over the past 5 years, there is a constant inflow of tenants, and real estate prices appear to be incredibly reasonable.
However, I am typically an optimist and when I get into these modes I have a hard time seeing the bad side. So to any investors in college/university neighborhoods, what have been your largest/most consistent challenges? Is it just high turnover and possible damage? Or is there more I am struggling to see?
Thank you!
I live in a college town UVA and have invested in and developed student rentals over the years. College towns can be fantastic as long as the university is thriving. You are pretty much guaranteed occupancy as long as you watch the supply as most university towns are experiencing building booms. You need solid management that knows the business. There are a couple of strategies either rent the entire unit or rent by the bed. Turns can be costly and students like to do the under the radar subleases so there are things you need to be aware of and prepared for but overall its a great long term play.
Biggest challenges are the turnover during the year with some tenants wanting to break lease and sublease. Put a system into place that either allows that or restricts it. We have had 100% occupancy in our 11 years of owning college rentals and only small minor repair expenses. Our market rate has higher vacancy and higher move out expenses.
@Ben Theriault students rentals can be a very profitable niche, however I have noticed a massive surge in competition in my market of Columbia, South Carolina from national student housing developers and local mom and pop types. I can't blame them. The numbers are fantastic if managed correctly. However, I can see a bubble looming in the next few years in several of the neighborhoods near campus.
Even though they may be low cost properties, you need to make sure that students will want to rent in the location. College students are not always looking for the cheapest housing. It also needs to be in a safe neighborhood and a place they will want to bring their friends too, and not just for parties. There are plenty of areas of Albany that make great student rentals and some that do not. Local agents would be able to give you a better idea of what areas to look. Hope this helps and feel free to reach out if you have more questions.
I grew up in a college town and while living there, it never stopped growing. 4 years later and the town still hasn't hit its peak and continues to expand, including housing. The demand is higher than ever and as long as the university is thriving, the surrounding areas will succeed.