Thread: new investor looking at college houses

Originally Posted by pete0428

Im just going to throw some of my ideas out here and hope some of you experienced investors can correct my thinking or tell me where im on to something.

I look at Real Estate investing as a long term way of financing things i may want in the future(beach house, kids college fund, ect.). If I dont see a dollar of profit now, it is alright as long as the rent covers all costs and I break even.

I was thinking about buying a house near a University near me, there is a great demand of students wanting to live off of campus and landlords here charge rediculous rents.(I know as I'm a current renter)

Most kids' parents pay for their rents so there is less of a chance that you would get stuck with late payments.

I know that kids will party and probably damage the house, but they are not especially nice to begin with and kids seem to be fine living like this as long as they are off campus. Usually it seems like the security deposit is more than enough to cover all of the damages that may occur.

What can you tell me about my idea? Is it too risky to rent to college kids? I feel like this way of investing is great because while other people are paying your mortgage down, you are free to invest your money elsewhere, then in 20 years you have a couple hundred dollars of equity to enjoy. You can enjoy life more now and live more comfortably, knowing that you have another source of income for your future.

Student rentals can be a great way to make an income, however, on student housing you must make a cash flow as frequently it is the case that you see appreciation rates at inflation or sometimes lower for student housing. Not only this but if you have something go wrong with the home and you are just breaking even then you will take a true loss. Make sure that you have any property you purchase cash flow. This means that you have rents that exceed your expenses. When figuring expenses make sure that you plan at least $100 dollars a month for maintainence.

Another thing that should be noted is if you invest in student housing do not rent to international students as they frequently default and you really have no legal recourse against them. Good luck and if you have any further questions feel free to private message me with them.

Thanks alot for your post! You bring to mind a great point. I actually lived with a student from Germany and he was a complete *******! He ended up leaving the country with hundreds of $$ unpaid bills. What you said is definately something to remember when looking for tenants.

Regarding the positive cash flow, I think it is do able in this situation. The rents these landlords charge are astronomical yet still cheaper for the students than living in dorms. The house I lived in last year cost $3700+ per month for a 5 bedroom house. It also had another unit in the basement probably going for $700 a month. Mind you this is a relatively small house. Comparable properties sell in the 300k range. With a sizable downpayment I think these properties can easily generate a positive cash flow.

As far as appreciation, my expectations are not that I am going to become rich off of this investment. My intentions are to take the equity that someone else is building for me and use it later on in life. While building my equity with someone else's money I will be able to freely use my own without worrying about having to be as frugal(sp).

Here in Minnesota, we have a number of investors that do this. They find great properties on the MLS, make offers, and then end up renting them out (often times to college students.)

I personally have invested for about 8 years now, and honestly, I have had good experiences with what you are describing below. Most of my rental properties are in suburban locations, but there are groups of four friends who are always looking to rent out homes. Again, realize that the student tenants in fact many be harder on the house or property than a family, but generally speaking, you never have to worry about getting your rent the 1st of the month.

Our team has found that investing in real estate is a long term game. You find a great property (in this market with so many homes for sale on the MLS it's pretty easy), you hold onto it and pay down the debt.

I think your idea is a great one. This is such a unique buying time for real estate investors. Again, supply on MLS is extremly high, and demand is level. You can go out and get a great buy on a home and then hold onto it.

For me personally, I bought most of my rental properties at the "high time" in the market. Since buying, the market has dipped. I have no problems keeping the properties rented and am paying down some of the principal, but there has been no appreciation.

For you, you can get the benefit of appreciation as well. I hope this helps. Happy investing to you!