Student Housing Property, rented until May 2016

[Lukas Katko]

Hey BP,

I've been looking around my area, and found an interesting property listing that I'd like to get your thoughts on.

The seller is claiming 15k cashflow from this property. I inquired as to why anyone would want to be rid of a property like that and he replied saying that he simply had too many properties in his portfolio to manage. 

I'll quote his listing here:

This is a turn-key student rental investment. The charming bungalow style 2-family is in excellent condition and needs no work. It is fully rented through May 2016. Two side by side 3BR apartments, each with a 2nd floor. Security deposit and the final month's rent is paid up front for each unit. This 2-family was completely renovated in 2005 and renovation costs totaled $80k. It has a 4 spot parking lot. Includes all appliances with Washer/Dryer in the basement. Roof (2005), boilers, electric, plumbing, appliances are all in great shape and nothing is needed.


I have a very successful and profitable business in student rentals and will provide the buyer with the information and guidance to make this property an ongoing financial success, including advice after the closing if wanted.
Estimated Financial Information

Price $164,000

Monthly Rent 2,520
Annual Rent 30,240

Utilities (water) ($480)
Current Taxes ($2,640)
Repair / Maint (7.5% rent) ($2,268)
Insurance ($1,000)
Annual Operating Income 23,852

Closing Costs 5,000
Mortgage (80%LTV) 131,200
Total Cash Invested 37,800

Monthly Mortgage Pmt @ 4.5%, 30yr ($665)
Annual Mortgage Pmt ($7,977)
Estim Net annual cash flow 15,875

Cash on Cash Return 42.0%
Gross Rent Multiplier 5.4
Cap Rate (NOI / Price) 14.5%

So here is my question:

Is is reasonable to rent student housing for 12 months a year?

I'd think student housing would have a lot of turn over, so I just want to know how realistic these numbers are in general.

Thanks in advance,

Lukas Katko