All Forum Posts by: David London

@Nick Seginowich Listen to Bill Syrios Podcast #140...great introduction to student housing! 

Proximity to campus and dependency on the academic schedule are the conundrum of student housing and are very challenging to reconcile...I'm talking from little experience...but a painful one...just missed the year with my first student SFH despite all my effort to get it ready on time...had accepted offer in January...closed beginning of March...then had very hard time finding a contractor (had about 8 bid on the project)...all were very busy and most didn't even bother to follow up with bids...bottom line...be prepared to hold the place empty for months.

From your post it seem you plan to invest locally which does give you a great advantage (I'm 3 hrs away from my houses).

Couple of thoughts:

In markets where the students want to walk to campus it is very hard to strike on both timing and proximity...you need to be prepare to get places as they become available as inventory is very limited...in my market the students practically don't cross certain streets...very defined geographic area and you have to be in it (this is market specific so you need to map your market).

As Tim Simmons said the most important thing is to know your market. How big is the student body?...Undergrads or Graduates? Living only close to campus or spread around? Houses or apartment complexes? Leasing as group or individually? Dominated by big landlords or many small landlords? Expected level of finishes...and the list go on...

If there are many graduate students you might be able to get the house rented also mid year as they tend to move more and are more independent (going to fellowship in mid year...returning from research abroad etc).

Are you looking at places which need rehab? If so line your contractors ahead of time and double the time they tell you it will take to get the job done.

Good Luck!


 

@Leslie Laboriel I would surly bid again at the price point that make sense as an investment...banks don't have feeling...wait a week or two and make the offer again...whatever you think is working for your situation.

Where I am REO prices vary wildly...some sell for 40% of original debt others at asking...hard to figure without actually bidding.

Most important thing with Co-ops though is to make sure you are allowed to sublet/rent from day 1. I know some co-ops in NYC which allow it but couldn't find any when I was looking in Westchester (White Plains, Yonkers and Port Chester)...many co-ops are difficult when it come to subletting.

Good Luck

@Josh Feldman As usual the answer is...depend on your goals...if you want to leave your job or need extra income then you should go on cash-flow...otherwise you have more options of balancing the two...I am in a market in PA which have both and recently price just appreciated so much (=less cash flow)...making me get on the car and drive to Binghamton on a recent free weekend...I liked what I saw when I got there but unless you like driving...It is quite far from Long Island...I personally find my PA 2.5 hour drive quite tiring and wonder every drive back if there is a better option closer to NYC...that said I am still open minded about Binghamton and started to follow it more closely...did stumble on an article about over supply in the student housing there just after my return but my guess this is true in many student housing markets under the current economic conditions.

Couple of thoughts about Student Housing from a distance (after a year in):

1. Timing is super critical...if you renovate a place you have to make sure it is going to be ready for showing when the students are out shopping...if you miss the students (happened to me) you have 100% vacancy for at least one semester if not two!

2. Don't cheap out on PM...from 5-6 hours away you need a good PM...with Student Housing you have high turnover...minimum once every 2 years...who will handle showings...turnover during summer?

3. If you pick a place which need rehab...factor extra time...keeping contractors to their promised timeline is already very hard even when you can show up everyday to the jobsite...(this is how I missed my deadline).  

BTW...where are you located in LI? Are you familiar with the Stony Brook housing market? Where do the student live around there? 

@Jim Cummings Thanks...Floor & Decor do have couple of stores in NJ and Long Island too...finally got the time to check them out...they carry 9'-4" straight slabs of both granite & quartz as you mentioned...about $500 great value...didn't fit my current project but great resource nonetheless. 

Hi, Thanks all for the great responses...was planning to answer earlier but had to tend to three of my sheep which decided to all stray in different directions...mainly was running after a contractor that missed a deadline and then slowed down even further since he realized my house is not rentable for fall semester anyway...so what's the rush..

Wanted to add some more context.
Both portfolios are composed of 4-5 BR houses and are scattered all around campus within walking distance to campus. The city ordinance limit student houses to up to 5 unrelated tenants...and the housing stock is typically +100 years old with lot coverage and bldg height that typically exceed what is allowed by current zoning (for example: the house I have there cover 47% of the lot while zoning allows 35%). Rent per room are typically $650-750 for renovated houses.

In the case of the most recent portfolio sale:

45 Houses - Mostly 5BR/2BA Average Rent $650 x BR

220 BR sold for $21,350,000
21M/45 = 466,000 x house

220 x 650 = 143000 Monthly Gross Rent x12 = 1,716,000 yearly rent`
Tax $3000x45=135000
Insurance 600x45=27000 
Management @6% 102000
Maint @5% 80000
Cap Improvement @7.5% 120000
Expenses Yearly = 464000
NOI 1,252,000
ROI 1,252,000/21,000,000 = 6%

@Joel Owens From all the explanations I got the 1031 exchange was the one which made most sense but even then if I calculate 500% appreciation (the buyer are a RE family from NYC) over the last 20 so years...they will have to pay only 3M in capital gains and so paying 21M for a group of house that will sell for 7M the loss is much greater...again...what am I missing? I was actually in town 2 days ago and verified the houses are all scattered around...no continuity which will allow for large scale development.

What is a penalty for missing the deadline on a 1031 exchange. 

@Tim S. Went back to both articles and the numbers are very clear which is why I'm puzzled...the plot actually thickens..a broker just sent me two off market portfolio offers of 14 houses for 7M each (again 500K x house).

@Bob Langworthy As per above calculation...for cash deal their return (and I was generous lowering their expenses) will be 6%...is that a decent return for just parking money? I assume also that they would want to un-park it sometime in the future...and so will need to find another buyer willing to pay x3 the price of the single parts.

@Tue Huynh-Nhut Vo The base price I assume of about 150K x house already reflect the premium for Student Housing...2 blocks east and west of the student area prices drop to 80-100K for similarly sized houses and rent drop more then half.

Thanks again...and appreciate any new insights...

@Alex Black Feel your pain...finding myself in a somewhat similar situation now with student housing in PA...in my case renovation that took too long and a will be nice house which currently look as if it was vandalized...demo just over and school start next week...hope to get it rented for spring semester.

I would do what @Patricia Steiner recommended...but advertised it by room as well...not familiar with the university you are operating in but there are usually last minute transfers...graduate students that return from fellowships or research abroad...international students which many time have harder time to secure places due to lack of credit and such...all these tenants usually look solo...if you can give the option of renting it furnished then even better.

I would also not let the PM handle all the advertising...I am putting the ads with my contact on Places4Students...Perchn and Craigslist...the 2 first sites are specific for student housing...heard also on Uloop...then when I get an inquiry I forward it to PM and follow up with them to make sure prospective tenant was contacted.

I also agree @Costin I. above that the responsibility is all ours as investors...I would not run after the PM for every little things...but I would put myself a reminder to ask for copies of the leases by Mid-March and nag the PM until I get them...Even that doesn't always work...I was calling both PM and contractor on an almost bi-weekly basis and still didn't manage to make them move fast enough...and high on my TDL is to look for an alternative management when renovation is done.

Good luck

@Sadie Bynum I wouldn't be hung to much on SF even if -25% of what initially advertised. Have to agree with Theresa Harris above...More important in my mind would be if the house appraised at offer price or above...If significantly below you should ask your lawyer if you can walk away from the deal.

Most important though is does the house work for your goals at the accepted offer price even if smaller in SF...How does it compare to other places you seen recently? 

As other before said if I was the seller I wouldn't lower the price as well...unless I was thinking you are going to walk away from the deal...IMO if your lawyer say you can walk away then you have to decide how badly you want this house and make a reasonable offer (what ever reasonable mean to you)...but you have to be willing to really walk away from the deal. 

I don't know about NYS (although I live here) but in PA where I bought my last rental, seller have to submit a standard disclosure form...and if deal fell apart he would have to disclose the real SF when putting house back on market now that he know it...this can be a negotiation chip for you...which you need to check with your buyer agent and lawyer...since he might not be able to list it at what he previously did...

I just went through a similar experience with my latest accepted offer...seller got 3 offers within 2 days...mine was probably the best (at asking)...but probably not far from the others...he pulled the house off the market allegedly to repair the main waste line then came up back again 9K higher then before (I doubt repair was more then 3K)...stinking for sure...but the house still worked also with the new number so I swallowed it and accepted...then managed to reduce it another 3K after inspection...a bit like playing tug of war...you get better the more you practice.

Last point. Listing are often misleading...in some places the MLS itself will pull the SF data automatically from the county records...I recently visited a house which was advertised as 3BR/1BA with one photo from the outside...infact it was a quite spacious 5BR/1.5BA...I doubt listing agent was even once inside...on county records house showes as 3/1...

Please let us know what you end up doing...this was one of the most interesting threads lately.

I assume from your answer the RE agent was representing the seller...since they are the professional...the mistake is mostly his/hers...again many will not even schedule a showing (to not waste their own time) before getting a mortgage pre-approval.

A buyer agent is simply a RE agent who represent the buyer in the transaction. An agent can represent the seller..the buyer..or both (which present somewhat a conflict of interests). All agents can be both although some would prefer to specialize and choose to focus on being either a seller agent or a buyer agent.

Typically when a seller agent list a property on the MLS the seller will pay 6% at closing to the agent or agents involved...If you as a buyer is represented by an agent they will split the commission 50/50...bottom line is that it make sense for a buyer to have an agent who represent them and is obligated to take care of the buyer interests...the seller agent obligation are first of all to the seller...You as buyer don't pay more for this representation...you can find a lot of explanation on that by just googling 'Buyer Agent'...The buyer agent guidance is particularly helpful in your first couple of deals/offers.

I found the agent I work with the most after I scheduled to see one of her listing (which I didn't made an offer on) we did had a good conversation though and she started to send me tailored listing alerts emails...which led so far to many offers and two deals with her...Most important thing is to find an agent you feel comfortable to work with and who understand your goals and parameters...In my case particularly since my market is out of state she was very helpful in navigating all the differences and details of the offers and deals.

You can work with multiple buyer agents (on different offers/deals of course) until you find the one you feel most comfortable with...avoid signing exclusive agreements with any if they ask...or at least consult the forums before doing so...

@Renee Yarbrough was there any brokers involved in the deal? 

I wouldn't feel to bad for the other parties involved...IMO you are for sure not the only one who made mistakes in the process:

1. If there was a RE agent involved they should have asked for a pre-approval or proof of funds...many agents will even ask for it before scheduling a showing...if there was no broker then it's seller mistake not to have one...

2. Again a good agent and mortgage broker should be able to tell you if a property would have problems getting finance and if you might be eligible for specific program.

3. Who are these vendors...would like to add them to my vendor list...again all RE deals can fall apart for many reasons and vendors take a risk agreeing to be paid at closing...as mentioned before all the repairs are owned by owner before closing and they should at least have a better house next round (and would be able to repay vendors then).

4. A newbie mistake...not a big deal...RE agents exist for a reason...when you just start having a buyer agent accompany you is very helpful...meet with as many as you can to find one you feel comfortable working with.

Good luck next round!

@Jenny Samedy Are you in Hempstead NY? You can use the Blumberg A-55 'New York Apartment Lease' these are standard forms that you can buy online or any stationary store (probably cheaper since they sell them loose)...I own two NY co-op rental and use it in both...another alternative if you work with an agent is using REBNY form which is very similar and would agent probably suggest with no charge to you.

In addition I follow my old landlady (an RE Agent) practice of supplementing it with a rider (copied hers) in which I stress/modify/add term which are important for me (for example that tenant cannot Airbnb the apt).

The co-op is a company which have their own interest which not necessarily align with yours...it just happen that sometime they allow you as a shareholder to sublet your unit.   

In a co-op you are the tenant of the cooperative and your tenant is a sub-tenant...I would consult a RE agent about it but I don't think the co-op can even sign a lease with your tenant. They can require that your tenant will be approved by the coop management or board and that the tenant will be required to follow all house rule and bylaws of the coop (the same as you as a shareholder is required to do).