All Forum Posts by: Peter Dunne

@Trevor Ewen

Thanks for the response. Philly is really a great city (and having quite a moment with all this development money flying around). I feel like maintaining an abundance mindset requires applying a consistent philosophy. It is easy to feel competitive when speaking to someone with a similar strategy in your market. Again, I think this is short-sighted. By maintaining relationships with similar investors in my market, I believe I will be able to gain better perspective on the market and potentially buy/sell properties to the other over time (especially if they are an older investor).

I lived very close to Germantown for 5 years, it is definitely block-by-block as to which areas are nicer and which are rough. I am assuming you are looking closer to LaSalle. While not an expert on that market, I do know a lot about trends in higher education and LaSalle is likely to struggle over the next 10 years. PM me if you are interested in connecting about your project.

@Christopher Telles

Thanks for the insight. I find it incredibly frustrating when conversations aren't transparent. It feels like such a waste of time. It's totally fine if you don't want to share certain information, but just say so. It makes it feel like there is a hidden agenda or lack of respect. That said, you are right, this is a helpful way to learn whether or not this will be a valuable relationship or partnership.

Hi All,

I have been been methodically building my way towards launching my investment strategy and continue to find that my most productive time is spent building strong relationships in the area. However, in many of my conversations with both newbie investors and even some active investors, I find there to be two primary groups. The first is highly professional, up-front and helpful (these are less common), while the second are difficult to read (shady even) and seem more interested in making a quick buck than their long-term credibility in the market. I prefer to be candid, helpful and honest about the value I can or cannot bring to the table. My desire is to slowly build wealth through building a track record of credibility with the best players in the market (Be they investors, financiers, Lawyers, CPAs, etc.).

I would like to hear from more seasoned investors on the importance of building a network for the long-term. What kinds of qualities do you look for that set apart people you would like to work with?

Hi Matt,

Welcome to the area. I know we are connecting in the future and so can discuss in more detail then. However, to find 5+ units under $100k a door, you need to invest in areas with an average cap rate of 7+, or find off-market deals. In the nicer areas that I am interested in (Mainline, West Mt. Airy, Chestnut Hill, etc.), investors are currently paying very high prices (low cap rates around 6). That said, most of the bigger investors (Post Brothers, Cross Properties, Galman Group) are looking for for the 50+ unit apartments, so there is opportunity in the smaller units if you can find them and work directly with the owners. I would begin by defining what kind of tenant you want to attract and the property profile that fits that market. Philly is a city of universities, so if housing students does or doesn't interest you, it would impact that neighborhoods you are interested in. Each Philly neighborhood has its own feel and attracts different populations.

Hi Phil,

Welcome to BP. I am also in Philly, working in university housing at Saint Joe's. It's a pretty busy market here in the city with many ways to look for deals (also pretty competitive right now as the summer heats up). It really depends on what kinds of property you are looking for, what kind of condition and what kinds of % returns you want. Are you looking to sell a current property you own with equity in it? That is where you would use the 1031 exchange. 

I will let more experienced folks provide detailed feedback, but wanted to say a quick welcome and good luck as you get started.

@Lucian Harris-Gallahue

Feel free to reach out. To be clear, I work for the university managing their own housing. Sometime investors will also enter into master lease agreements with the university, whereby the tenant is the school, not the students. Students pay the school, the school pays the investor. We currently have two.

There are several concerning trends in higher education. The student loan "bubble" is one of them, with the primary concern for landlords being that if the government pulls the plug or makes it more difficult for students to qualify for loans there will be less students going to college and/or less easy loans to pay for living expenses (i.e. your rent). This is a deeper conversation, but I don't think this can be defined as a bubble, since there is no asset connected with the lending (like there were houses in 2007, dot come stocks in 1997 or tulips in 1637).

The second concerning factor is the demographic decline in traditional college-age students over the next 10 years. We are already seeing it with greater competition over fewer 18 year-olds, driving down our class sizes and driving up our discount rates (Universities may have a $50k sticker price, but if their discount rate is 42% the average student is actually paying $29k). This decline in enrollment will hit various institutions differently (see Sweetbriar College). If you are buying into an area around a university that cannot compete, you could see the student housing market contract rapidly. I would encourage to invest around established schools that are A. Affordable (state schools) or B. have a strong brand (i.e. Harvard, Dartmouth, Stanford, etc.). Universities have been maintaining by increasing graduate and international enrollement (the first group is pretty well tapped out, but the second shows huge potential with Asian and African students looking for opportunities).

I have been working on the university side of student housing for 6 years (currently overseeing $20MM in annual revenue), but in the last year also took on the role of providing off-campus housing resources for the university community. I work regularly with local property managers and landlords, connecting them to our students using an online portal through a popular vendor (Off-Campus Partners LLC). Many universities use these kinds of specialized listing services, which are excellent resources for scoping out what units are going for. Since I am the administrator for our site, I can run back-end reports for average prices for various types of units, over different time intervals (For instance, I can see how 2-Bed 1-Bath units prices are changing month-to-month).

The student housing business is definitely different in that you are generally working with multiple individuals on the lease (and their parents). Parent management adds an interesting layer. That said, here in the Philly market, students are willing to pay significantly above market rent. For instance, there are large stone houses in our area with 5+ bedrooms. Students generally look to spend $600-$800 per person, so some of these houses will rent at $3500/month for 5-6 students in Philadelphia (despite it being illegal to have more than 3 in one property). Similar houses just across county lines (in one of the best school districts in PA) will rent for closer to $2500/month even though the purchase price is double the Philadelphia student housing property. 

So, local landlords trade the issues mentioned by prior posts for significantly higher returns. I personally will not invest in those kinds of properties because of the local ordinances regarding max occupants, but I have spoken to many investors who have less qualms. 

One of the other perks of renting to students is the predictable cycle. With many leases starting June 1, landlords can often sign up next year's students as early as September (8 months in advance). In our area, we often have "legacy" properties, where seniors pass the lease down to the next class, so there are almost no advertising costs.

Welcome Jeff! It sounds like you have a good foundation and vision to get started. I am in an almost identical family situation with a toddler and another on the way, living and working here in the Overbrook/Wynnewood area. I have an architecture background and work for St. Joe's, managing their on-campus housing and recently took on the off-campus housing role as well. So I am slowly getting to know the local landlords and property managers. All the best as you begin your real estate journey. I can't offer much in terms of partnership, as I am waiting to get into the market for a few years while I wrap up my MBA and develop a plan. However, I would be happy to compare notes and share resources.

Hey @Andrew Inglis

Welcome to BP and to Philadelphia. The podcasts are great aren't they? I'm in a similar boat, living/working in NW Philly, raising a young family and looking for the right time and opportunity to get started with buy & hold. Perhaps our paths will cross some day. All the best.

Hi Ethan,

Sounds like an exciting (and terrifying) 18 months. I can't help you out on the deals end, but wanted to say hello and welcome to the BP community. I am sitting in a similar position to you, but perhaps 2 years behind, working a great full-time job, working on my MBA and business plan while soaking up everything I can here on BP (my background is in architecture/sustainability). I live and work in the NW party of Philly and am intrigued to see how your first properties turn out.

All the best.

Thanks everyone for the welcome and advice. @Jon Lafferty your point is well taken and road I plan to be on. @Andresa Rosa I appreciate your taking the time to connect (you have a nice website set up for your business), and would glad to meet you both sometime. I am in no rush.