College House - Is this a good deal?

Question

Hi there!

I'm thinking about buying a college house and wanted to verify it's a good deal and it could get financing.  My biggest concern is that the property is not being offered at a discount -- it's being sold at market rate.  Hopefully the ROI will counter that and let me build equity quickly.

Here are the details:

$319k (with an ARV of $319k)15 bed / 6 bathGross rent: $9050/monthMortgage: $2799.45 (100% financing at 10%)Total Operating Expense $3849.33/month (Maintenance 17%, Vacancy 7%, tax and insurance included)Monthly Cashflow: $2401.21

If you have any thoughts on this property, I'd love to hear them.  I've never bought a college house before, but at first glance the numbers seem to be great.

Thanks!Robert.

Colleen F. · Answer

A couple of things you need to be sure of:

1.Are there any local regs on the books in this town regarding limits to unrelated individuals in a house.  Are their ongoing discussions in the town regarding implementing such regulations. This could seriously impact your plan.

2. If is it considered a boarding house does it meet fire code for a boarding house (or otherwise).

3. Rented furnished or unfurnished?  If furnished are furnishings included (budget for this if not).

4. does your one student meet the towns onsite property manager requirement.  (not sure this 50% off rent is gonna do it-lot of instability using a student (undergrad) too).

Numbers look good but there are a lot of other things to check out.

Kyle Scofield · Answer

@Robert Lindsley You're welcome!  Good luck man, hope all works out and you get the deal!

Robert Lindsley · Answer

Hi @Colleen F.

Thanks - I've been doing a lot of research.  I am planning on moving forward with the house and am currently looking for funding.

Agreed a working young adult or a grad student would be better than an undergrad.  I really need to be able to rely on someone to handle the day-to-day around the house.

The fire department came out to the house a few weeks ago and required all the smoke detectors be replaced with combination smoke/carbon monoxide detectors.  Once that work is completed the fire department will come back out and issue their approvals.

There are multiple pull switches throughout the house feeding into a central alarm.  The house doesn't have sprinklers (as far as I know they were grandfathered in).

Thanks again for your thoughts on this -- they're very much appreciated!Robert.

Colleen F. · Answer

Are you moving with this, based on your answers it looks like you covered all bases. Might try to get a working young adult or a grad student for the house manager.  If you do it will be longer term and more stable.  If you want them to do anything mechanical interview them well you will be amazed how little they can know about house maintenance.

You say you have fire and smoke detectors I will assume the fire marshall  made reccommendations. For a rooming house do you need sprinklers or  a central alarm for the house ?

Robert Lindsley · Answer

Hi Colleen,

Thanks for posting the questions!  I've done a lot of the research already, but there are a few you brought up I will continue to research.

1. The house is categorized as a rooming house.  In this town that means up to 15 unrelated individuals can live in the house assuming the floor plan supports that many people.

2. It does.  They've rewired the electrical and installed new smoke and fire detectors.  Part of my plan is when I offer, I'm building in a site plan contingency.  That will get the city out to look at the house and hopefully uncover anything.

3. All the rooms are rented furnished and the house comes with all the furniture.

4. I spoke with the building inspector and a student manager does meet the requirement.  Finding a stable undergrad....now that's another story! :)

If you think of any other questions please post!  I want to make sure I've thought of everything before moving forward.

Thanks!Robert.

Robert Lindsley · Answer

Hi Nicholas,

I'm going to be acquiring private or hard money for the deal although I haven't yet reached out to investors. I brought a contractor out yesterday and better understand the condition of the house, so funding is now my next hurdle. I hope since the deal is so good that funding will be relatively straightforward.

Robert.

Nicholas Meeker · Answer

Robert, could you give a little info for a newbie like myself on how you're financing this? How long are you carrying the loan? Is this long term? I'm just curious how you're able to find such great terms (although 10% might not always work on deals not as great as this one). Thanks!

Edward Rhoads · Answer

Indy is great for both fix and flippers and buy and holders.  Rents are good and properties are inexpensive.

Robert Lindsley · Answer

Hi Gale,

Believe it or not I found it on craigslist. I have a full time property scout/admin and she sent the property to me as a laugh. But it turned out to be a great deal!

Where are you in Indiana? I've heard amazing things about Indianapolis.

Gale Penno · Answer

@Robert

@Robert Lindsley  Do you mind if I ask how you came across that deal.  I'm looking for something like that in Indiana.

Gale

College House - Is this a good deal?

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