College area investing
Does anybody here rent in college areas? It is looking like I will be spending much of my life here in Columbia, Missouri. I have always wanted to have a strong buy and hold portfolio I just don't know how much more risk will be involved.
When doing rentals in college areas do you need to use something like a 55% rule? I know the rule is just a rule of thumb and it really is whatever work for the investor but I didn't know if anyone had any experience. I know expenses will be high but I do feel there are plusses to investing in the college area with being able to constantly have a demand and getting your rent from the tenants.
Any help or word to the wise would be awesome!
I have 2 rentals (single family houses) in close to College in Lincoln NE. They usually rent very quick. My strategy is the same for any property, calculate the number the same way you would any other property...It's hard to find well priced properties near colleges... they are usually overpriced... but stick to your parameters and with patience you will find them.
I have several properties near the University of Wyoming. The key to them even more than other properties is LOCATION! I won't typically buy farther than 4 blocks from campus unless it's a killer deal. I've found my expenses to be 35% but I recognize that might be low compared to the national scene. Year leases are absolutely required also. Good luck.
I have a large portion of my apartment complexes on college or near the campus and have found it to be an excellent investment. Like any other rental property, the same formula's apply. The quality of the building is important. Bear in mind college units tend to suffer a bit more wear and tear then the average market rate rental. I would factor that into the type of rental you purchase. The bonus that I found a few years back is when the rental industy was a bit sluggish, due to large amounts of first home buyers leaving their rentals to purchase thier first home, I did not have a giant decrease in rental applicants. I attibuted this to being near the college campus to reign in applicants. I'm looking to acquire a small 4 unit building in the town my step son goes to college, to defray the cost of his housing.
Years ago I remember talking with someone who owned some rental property near a University. Their philosophy for renting to college students was as follows:
Sign a lease with a deposit
Inspect every month
All repairs (no matter what the reason) were the students/tenants fault/obligation (written in lease). Therefore they fixed everything first before they paid the rent.
I think something like a new roof, foundation repair, etc were excluded.
The point was to eliminate any debate on who was at fault for constant college student related damage. This really cut down on their damages with this method. Of course they couldn't get away with this in a less demand market. These were properties right across the street from the University.
Yes, I rent properties in a university town.
No one but slumlords really deal with property close to campus because students trash the houses and the yards.
Buy in the best residential neighborhoods because their parents are footing the bill and they want their children to be safe.
Call and post when you catch a glimmer of the first wheel on your grass and never let them do the yard...they're incapable. Same with filters.
Monitor, monitor, monitor. When you've had enough of lower classmen you'll be on Craigslist looking for law students, MBA's and Seniors. Meet the parents and no pets.
#3 Off Topic Contributor
- Investor
- Viera, FL
Hello Matt,
I learned property management right by you in Springfield, Missouri - another Missouri college town. Being on the footsteps of the campus isn't as big a deal in the midwest as other parts of the country as just about everyone in the midwest has a car. I'd buy houses and be open to renting to either students or the huge resident population that staffs the service industries that serve college towns (guess which of the two is here year round and is thus the one I focus on).
Tim
College rentals is almost a 'specialty niche'. And in a way can be similar to renting to low-income tenants (who often don't work, have no sense of responsibility, etc.).
First off do your due diligence about the school as the rate of colleges going out of business is rising. If the college seriously shrinks or goes out of business you will not do well.
Finding cash-flowing prices in this area is hard, because close-to-college property is like waterfront property. Plus, you've got competition from well-heeled parents buying for their kids, and fuzzy-math investors who think that if the rent covers the mortgage they are doing swell, especially when they add in 'appreciation'.
Keep in mind this crop of kids is the most spoiled I have ever seen and they all feel super-entitled. In addition to the sand volley-ball courts they want heated pools plus private baths for each bedroom plus high speed internet, etc. All of which and more is offered by new construction. So -- as has been said already -- you need great location.
Lastly, though I could go on, get all their parents to sign notarized guarantees. And keep the parents in the loop. And photograph everything before Jr. moves in, as well as have them all sign a move-in inspection.
And understand that while these kids can vote and own guns and drive cars and drink, they're still just kids! Usually in all the worst ways when it comes to your rental!
Good luck!
I own a 4bd 2ba property in North Carolina 2 blocks from a university. The home is not located in the "party zone" and is in more of a residential family setting. I target females as my tenants. Currently (since June) have 4 girls in the house with zero problems. You've got to rent to girls.
I believe this property to be a fantastic investment as there is a constant need for housing every new school year. Even if I owned this property for another 10 years I don't foresee ever being stuck without tenants. Lastly, I fetch a 10% Cap rate on the house, which I am very happy about.
The market for SFH's within 4-5 blocks of campus is incredibly competitive. I believe that the only reason I was able to fetch up this house, after being on the market for 2 weeks, was because it had a gigantic in-ground pool in the backyard. Apparently other local investors had looked at the property and ran away because of the pool. I was up for the challenge of filling it in. Cost me about $4000 to have it professionally filled in. Done and done.
Matt,
We do most of our rentals in Columbia, MO and have had a good experience. It is a great college town and place to buy some rentals. If you want to chat more feel free to contact me.
Jeff
We do most of our rentals in Columbia, MO and have had a good experience. It is a great college town and place to buy some rentals. If you want to chat more feel free to contact me.
Hey Jeff, Im no longer in CoMo I am in Arizona now. But I do find it interesting that you have rentals out there and are form Chicago. I am originally from the northern/north west burbs but just went to school down at Mizzou.