student housing pickup

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student housing pickup

Jay Borowsky
Philadelphia, PA · Member since 2013 · 3 posts · 0 votes

Hi,

I've got a potential deal for student housing with a 6BR house in Binghamton, NY for $92k. Each BR will bring in $350-400 once repairs and renovations are completed. The cost of them will be $10-15k. Taxes on the house are approximately are just under $4k. 20% down and finance the rest.

The vacancy rate is almost non existent because the houses fill up quickly on a year to year basis. I know that I should factor in some give here but I honestly don't believe that it is an issue given the demand for offcampus housing by students..

One problem is there has been no price appreciation in this city in years being a suffering rustbelt city. The university up there is planning to expand and it may turn into a college town with appreciation down the road but I can't count on it.

What do you think of this as an investment strictly on a cash flow basis?

Thanks for your advice.

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Carson M.
Investor · Ferndale, MI · Member since 2013 · 130 posts · 41 votes
12y

@Jay Borowsky

I am currently a student at a big (50,000 kid) university. there is a lot of student housing right off of the main road on campus. A few points I would like to make in hopes of aiding in your decision:

-At my school, it is a dog eat dog fight every October when all the management companies open leases for the following year. Most people looking for a home get boxed out and have to settle for an apartment

-Make sure the home is close to campus. Here, a home a block or two from campus/downtown have rents 1.5-2x the amount than a home 4-5 blocks away. Big difference

-I would not worry about not being able to fill a 6 person home. Sure, there are less 6 person groups looking for homes, but there are a whole lot less 6 person homes available. Even this year, I was looking for a 6 or 7 person home and was not able to find a single one available.

-Even though school is 9 months, every home and apartment here is a 12 month lease. kids either eat the cost, sublease, or live here in the summer

-Parents pay all of housing for almost everyone here. Make the parents co sign and be responsible for payments. Also, a lot of management companies here give a tiny discount for paying 3 or 4 times a year, that way kids don't need their parents to send a check up 12x. easier on everyone

-Every single property here tacts on a $200-500 cleaning fee for the end of the year.

If I can help clear anything up from a students perspective that has gone through the process, please let me know. Carson

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  • Christopher Giannino
    Real Estate Agent · Hamilton, NJ · Member since 2013 · 464 posts · 311 votes
    12y
    Jay Borowsky I'm in a similar situation as you looking to invest in a college town. I would like to see what others think about purchasing a house with potentially little appreciation. I think it has potential to be a good idea as long as the rent covers all your expenses. How much are you looking to cash flow monthly after expenses?
    0Reply
  • Bill Jacobsen
    Salem, OR · Member since 2013 · 701 posts · 159 votes
    12y

    In my opinion this property will be of interest to investors only. That means it will sell on the cash flow. Appreciation will occur as rents increase.

    I am assuming that contracts are signed for a year and these rates are paid 12 months a year. If so, it seems like a pretty good deal to me.

    I never count on appreciation in my analysis. It either cash flows or I walk.

    Good Luck.

    Bill

    0Reply
  • William Donaldson
    Clemson, SC · Member since 2012 · 82 posts · 19 votes
    12y

    The numbers look good but you are taking on additional risk due to it being a 6 BR. I own a student rental in a true college town, and I don't know of any properties having more than 5 BRs other than fraternity housing.

    Usually students like to live with their friends. There are plenty of groups of 3 or 4 friends looking for off-campus housing. A group of 6 could be pushing it, and matching up two groups of three, or 6 random roommates for that matter, could be disastrous. You may attract fraternity or sorority members, which would be great for reducing vacancy but potentially terrible for the condition of your investment.

    I don't know your market, so maybe filling a 6 BR is relatively easy and straightforward. Let me add that I'm sorry about the taxes in NY (my taxes for a property of similar value is less than 25% of that amount).

    Just a few tips if you do go through with the purchase and rehab: Make energy efficient upgrades (windows, appliances, etc.) so the students' utility bills are better than average; have parents co-sign on the leases; and think about including utilities in the rent, such as water and internet, and raising the rent to compensate. It will be tough on the one person who puts the utilities in their name and then has to chase down their five roommates to get payment for their share.

    1Reply
  • Carson M.
    Investor · Ferndale, MI · Member since 2013 · 130 posts · 41 votes
    12y

    @Jay Borowsky

    I am currently a student at a big (50,000 kid) university. there is a lot of student housing right off of the main road on campus. A few points I would like to make in hopes of aiding in your decision:

    -At my school, it is a dog eat dog fight every October when all the management companies open leases for the following year. Most people looking for a home get boxed out and have to settle for an apartment

    -Make sure the home is close to campus. Here, a home a block or two from campus/downtown have rents 1.5-2x the amount than a home 4-5 blocks away. Big difference

    -I would not worry about not being able to fill a 6 person home. Sure, there are less 6 person groups looking for homes, but there are a whole lot less 6 person homes available. Even this year, I was looking for a 6 or 7 person home and was not able to find a single one available.

    -Even though school is 9 months, every home and apartment here is a 12 month lease. kids either eat the cost, sublease, or live here in the summer

    -Parents pay all of housing for almost everyone here. Make the parents co sign and be responsible for payments. Also, a lot of management companies here give a tiny discount for paying 3 or 4 times a year, that way kids don't need their parents to send a check up 12x. easier on everyone

    -Every single property here tacts on a $200-500 cleaning fee for the end of the year.

    If I can help clear anything up from a students perspective that has gone through the process, please let me know. Carson

    6Reply
  • Jay Borowsky
    OP
    Philadelphia, PA · Member since 2013 · 3 posts · 0 votes
    12y

    Thanks for the thoughts everybody. I pulled the trigger on the property. Failed to mention that my son is one of the tenants as a junior so I have two years with him, my nephew and four others. I think the repairs need will be below $10K unless I put in new kitchen cabinets.

    0Reply
  • Ray Gomez
    Brooklyn, NY · Member since 2014 · 11 posts · 0 votes
    12y

    @ Jay Borowsky

    Hi Jay,

    am also looking in the Binghampton, NY area for a good deal for either a two or three family house. One quick question are you planning to manage the property yourself. Also, any good recommendations on a good real estate agent?

    Good luck with the property!

    -Ray

    0Reply
  • Jay Borowsky
    OP
    Philadelphia, PA · Member since 2013 · 3 posts · 0 votes
    12y

    Ray-I am presently managing the property myself. I have family among the renters so it is less risky for me  to go on my own. At some point though I will get a PM especially if I buy another house.   If you are looking at the student rental market, then I would suggest you contact Charlie Ackerman.   Good luck!

    0Reply
  • Ray Gomez
    Brooklyn, NY · Member since 2014 · 11 posts · 0 votes
    12y

    @Jay Borowsky,

    Ray-I am presently managing the property myself. I have family among the renters so it is less risky for me to go on my own. At some point though I will get a PM especially if I buy another house. If you are looking at the student rental market, then I would suggest you contact Charlie Ackerman. Good luck!

    Thank you Jay, I will reach out to him. Good luck with your new purchase!

    0Reply
  • Eli Rods
    Long Island City, NY · Member since 2016 · 46 posts · 2 votes
    10y
    @Jay Borowsky Opening up this thread again since I am looking for an investment property to rent out to students. Could you tell me how your experience has been so far? What your cap rate is? Any advice in my search or tips please? Appreciate your time here.
    0Reply
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