All Forum Posts by: David O.

You need to honor the lease that is in place  ... it transfers with the property. Once it expires you can increase the rent with a new lease, and if they would like to stay they will agree to it.

That said, you can always ask if they would sign a new lease with an increase. Pretty sure their answer will be no. Then, you will be back to honoring the existing lease to the end of its term as stated above.

Hope that made sense.

First thing you ant to do is put some of that cash flow into a savings account for capex and other issues that may come up. You don't want to be dipping into your personal funds to put in a new AC unit or replace a roof.

I started at 50. Wish I had started sooner.

See if the electrical has been updated. Those old homes had knob and tube wiring and smaller service panels that will not stand up to today's electronics usage. Also, find out if the main sewage line from the house to the street is original. They were clay tile and tend to collapse over time, and will definitely need to be replaced at some point. Otherwise, old homes are cool and have lots of character.

@Randy E. I have a son in college (just started his junior year) and I bought a house for him and his friends to live in. I considered having him as a partner in the property as well, but changed my mind after beginning the financial aid process. His income and from the property would have had a negative impact on his ability to get aid, and how much he could get. So, what I am considering instead is to make him a partner in the property after graduation, and base his percent ownership on the percent that he has paid into the property while living in it. Just something to consider.

If your state allows it you could consider a series LLC - main one that is your umbrella LLC, with separate LLCS created within that for each individual deal. That said, talk to your CPA and/or legal counsel for advice.

I agree with @Tim S. that it depends on your market. I try to keep mine within a couple of blocks of campus. Also, be aware that the farther from campus you go, even if it is still considered desirable, the lower the rents you will most likely be able to command. But, it will probably be less expensive to buy the property as well. Lots to consider :-)

To expand on what @Janell Bryan said, it does depend on the idiosyncrasies of your market, as well. Our students are generally on board for two to three years (two if they have done the fraternity/sorority stuff, three if not), and we do 12 month leases so Summers are not down time as far as income is concerned, but the properties are usually more or less empty for those months so less wear and tear and lower utilities.

So, bottom line, as with any other type of real estate investment, research your local market to see what the trends are.

@Michael Temple  Students do stupid stuff ... they are still learning how to live on their own. Set your expectations with them from the get go, follow up with reminders every now and then, and your place shouldn't get trashed. Probably a little more wear and tear than usual, but not trashed.

You may have yearly turnover. I don't. Get them in their for their second year and have them for three. Then do it again. That said, even if you do turn over every year, you have a built in market so finding new tenants is easier.

Do not put the parents on the lease as co-signors. That gives them the same rights as the students - which means you are potentially dealing with twice as many people then will be actually living there. Have the parents go through the background check and be guarantors for the lease, utilities, and the security. If a toilet is running or backed up you want to hear from one of the kids, not mom or dad.

@Michael Temple

One approach would be if the market rents are significantly higher than actual rents, go with the actual rents. Then if you can transition to market rents like @Matt K. says (and you should certainly try), you will be in the bonus as far as your analysis is concerned. If not, you know the numbers work anyway at the actual rents.

Another approach would be to perhaps meet in the middle. If market rents are $2000, actual rents are $1600, use $1800 for your analysis. Of course, depending on the realities of your particular market, you could run your analysis at $1800, close the deal, then find that you can't get the $1800 after all. Oops.

Personally, I would be more inclined to follow the more conservative approach and make sure the numbers work, then enjoy the bonus if you can increase rents to market.