Investor looking for rentals in college communities

14 Replies

I am an accidental investor as I decided to keep my Minneapolis home after relocating to Tampa, FL and currently have renters in place in Minneapolis.  Looking to buy a multi-family home in Gainesville area near UF where my son can stay, as well as make money from other UF students.  Idea is that buying and renting home/ duplex/ quad in college town will be cheaper than dorm room for my son, since he will be paying for tuition.

Just a tip - you might consider financing it with your son through Freddie Mac and capture owner-occupied financing terms. So instead of putting 25% down at a investor rate, you put 3.5%-5% down (or at least have the option to if you want) and capture the OO rate.

How it works from a mortgage standpoint is that he's the occupant borrower with no income. You're the non-occupant co-signer with income. Freddie Mac allows the ratios to merge. 

I've done a few deals like this in the last year or so with parents and children. It's a good financial deal usually, and it's a great opportunity for the child to learn about real estate if that's something they're interested in. The one thing to consider long term is what you'll do with the property after they graduate.

Thanks.  That is an interesting perspective that I was unaware of.  After he graduates, I plan to keep property but that may change after experience renting I college students hat are not my own.  Plan to buy close to campus so more desirable for students wishing I live off campus. Turnover rate also consideration but better than being vacant.

@Jonathan Roach

Welcome aboard the vibrant BP community. You already have some experience and with additional effort, will quickly climb the REI ladder to its pinnacle.

@Ryan Gillette has an excellent tip on financing the deal via Freddie Mac, coupled with a question about your exit strategy if any at the end of four years.

To be more successful, you simply have to work on the other elements to progress your REI pursuit. Below are some quick links to get engaged on this site.

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Lastly, this site thrives on interactions and as such we encourage two way exchanges and look forward to educational and thought provoking ideas relevant to REI.

@Ryan Gillette that is a good idea, i did not think of that when i did exactly what Jonathan did for my daughter, i bought a single family and rent out the other 3 bedrooms. i did equity my home and paid cash for that one, but i wish i did it the way you said. that would have helped my daughter establish credit and it would have helped to establish that she was an in state student and she would have qualified for in state tuition. 2 more positives for setting up as Ryan mentioned.

There was a podcast a few weeks ago about a guy who made that his niche. He has some insights into the turnover (I think he said about 75-80%/year) and how he had to start marketing a property every fall. If it's something you see yourself getting out of in 3-4 years though, I would just make sure to run numbers on everything, specifically your upfront costs and then your selling costs. So if upfront you pay $3K in costs (between the attorney, the mortgage, etc) and then at closing you lose another 8-10% (6% realtor fee, attorney fee, any concessions, any repairs, etc), it might negate any profit made (or saved) from your time owning it. There's also the risk that after 3-4 years of college students, it's in worse condition. Just as an example of how it can go wrong: Say you pay $100K to acquire it + $3K closing costs, make no improvements, and sell it for $95K in 3 years. You net $86K from the sale after paying the realtor, attorney, etc. So you bought for $103 and walked with $86, or a $17K loss.  Which is ok if it's built into the rent you're charging (say you profited $40K over that period). Not to discourage you- just something to think about.

Thanks for all the advice.  I think getting son invested in real estate will help him in long run, if nothing, saves him from huge student loans as room and board is 14k a year.  Plays cards right, may be able to live rent free for 4 years if gets enough renters.  

I'm on my 3rd student rental, i have renovated them completely, and put in new furnaces and hot water heaters. my property manager charges slightly more than most places for mine because they are nicer than most. i have found if you take care of the place, the students will as well, most students that destroy the places usually stay in the cheapest place they can find. i have had good luck with the students i have had for the past 3 years, and some of them have re-rented.

Just a word of advice. You may want to look into the rental rules and regulations for properties close to UF they had some strict codes regarding noise and what not not too long ago. Let me know if you need to talk to property management the one I use is pretty decent

@Jonathan Roach

I won't repeat what's been said here. All good advice.

I live in Gainesville and have an alert set up so I got this post. Congrats on your son getting into UF. I'm sure he will like it.

I have some SFR rentals here but nothing like a multi. My tenants are not students. I've not completely decided on the student rental, yet.

I'm sure you'll find something close to campus.

I recently found a realtor that does PM as well. I've been interviewing around just to see what the competition is doing. One I found only charges 10% gross rent and nothing to place the tenant or renew the tenant. Most other if not all other PMs have those charges. This company though is very old school. They don't have ACH so they mail the owner checks or deposit them if their bank is close. Like I said, old school. lol But if you want to save on the fees and they turn out to be a good management company then you can't beat that.

If you want their number let me know.

Good luck in your search.....

Originally posted by @Daria B. :

@Jonathan Roach

I won't repeat what's been said here. All good advice.

I live in Gainesville and have an alert set up so I got this post. Congrats on your son getting into UF. I'm sure he will like it.

I have some SFR rentals here but nothing like a multi. My tenants are not students. I've not completely decided on the student rental, yet.

I'm sure you'll find something close to campus.

I recently found a realtor that does PM as well. I've been interviewing around just to see what the competition is doing. One I found only charges 10% gross rent and nothing to place the tenant or renew the tenant. Most other if not all other PMs have those charges. This company though is very old school. They don't have ACH so they mail the owner checks or deposit them if their bank is close. Like I said, old school. lol But if you want to save on the fees and they turn out to be a good management company then you can't beat that.

If you want their number let me know.

Good luck in your search.....

@Jonathan Roach Hi Jonathan, welcome. I was in the same boat as you somewhat in that I moved to keep my home and rented it out and now am looking into purchasing more real estate property specifically multi-homes. I'm also looking at college property but instead in Tampa by USF.  Good luck and you're smart into looking at college with your son as one of the tenants this way if you plan it right your son can live rent free. Nice

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