Student Rental VS Traditional Rental
Hi Everyone,
I'm new to the investing side of real estate and have been actively looking for a rental property. I have narrowed my search criteria down to small multi-families (4 units or less) for under $200k. I live in New Hampshire so finding properties in that price range can be tough however they can be found. Just a few days ago I found a 4 unit located 5 minutes from one of the large universities in the area. The home was build in 1895 (2,358 sf) and currently has a kitchen, living room, bathroom and 2 bedrooms on each floors (2 total). It has the potential to convert one of the first floor rooms back into a bedroom, which would make it a 5 unit property. One big positive is that its had the same owner for 55 years, which I've been told has kept up with all regular maintenance. The furnace was installed in approx. 2009, windows are older wooden with combo storms. The roof is slate and likely original, updated electric panels and it has both public water and sewer. *The property also has a detached two stall garage.
Currently the second floor is being rented on a month to month for $900 which is well below market value. The agent estimates that market rent is around $1,100 per unit, however according to rentometer it would be around $1,500 per unit and slightly more if I were to convert the first floor back to a 3 bedroom. I also called a few landlords in the area to get an idea of what student rentals are going for. I was told rooms are renting for $675 with utilities on a property very similar in age and distance to the college as the one I'm looking at.
These are the big questions that I'm trying to determine myself, which is would it be better to rent the home traditionally with one tenant on the first floor and another on the second? Or use the house as a student rental and rent by the room? My concern is that due to the location it may not be very desirable to potential tenants with a family. Nor would the style of the home be very suiting to most working professionals in my opinion. Based off of the pictures it doesn't look like there is any type of separation between the first and second floor.
The property is listed for $179,900 and has been on the market for 4 days. Based on my current finical situation I would more than likely be using an FHA loan to purchase the property. Only issue with that would be living In the property for the first year. One idea was converting the garage into a small apartment, however I will have to find out if that is even a possibility or legal in my area. *Property taxes for 2018 were just about $6,500 per year.
I would greatly appreciate any feedback and thoughts you might have for a new investor in my position. My other big concern is the age of the property and the high chance of major repairs needing to be done in the near future. I tried my best to include all of the information that I have access to at the time being, however if there's any additional information that you need feel free to ask me.
Thank you,
Cody