College town rent/live-in: please critique strategy

[Gerard]

Hi folks, please let me know of any problems you foresee with this idea:
1. Buy house, 2 or 3 br plus small (basement?) unit, in Canadian college town with low house prices. Price, about $50-60K.
2. Rent out main unit to students, Sept-May, about $700/mo plus utilities.
3. Live in basement unit Sept-May, move upstairs for the summer. Do minor repairs and renos each summer.
4. Live highly frugal life from rent and some savings.
5. Avoid getting student tenants who trash the place by being downstairs all the time to observe and coerce.
We're obviously talking a highly frugal life here, as 8(700)-1000 taxes = $4600/yr for food and basement unit utilities.

So, what's wrong with this? The danger of sudden major repair costs suggests itself, and I'm not sure what kind of insurance would make sense on a property that's worth so little to start with (i.e., if insurer insists on insuring for replacement value, that would be about four times the actual purchase cost).

[2527]

This used to be called running a boarding house.  i don't see anything wrong with it.

[grantmeaname]

You'd have to not charge rent for the summer months while the students aren't there. Here (but maybe not in Canada), most landlords have 12-month leases and collect for the whole year, and a reasonably large proportion of the students live in the same house over the summer or sublet.

[Gerard]

I'm thinking of the summer strategy as a win-win. Lots of students here (including in the town I'm thinking of) go back to their home town or country in the summer, and have trouble finding someone to take over their lease (because everyone else is doing the same thing). So I figure renting by the semester would give me a competitive advantage. Plus the luxury of having the upstairs (and yard, for gardening) in the summer.
The difference between this and a boarding house would be that the basement unit would be a separate apartment, so the renters would be getting a self-contained unit.
I guess my big concern would be getting rowdy drunks, but the plan would be to use the strategies here (and a few of my own -- no smoking, for example) to attract a calmer class of tenant.

[feelingroovy]

Hi Gerard,

We do something very similar.  I live in a university town and live in a 3br house with a 2br apt over the detached garage.  (We actually also have another rental house with a similar arrangement).

The rent on the 2br doesn't quite cover our mortgage, including taxes and insurance, but it's close.  Our net housing expenses are about $200/mo.  If we could live in the smaller space, we would actually have negative housing expenses. 

We have always rented to professionals or grad students and it has worked out very well. We're not in the party-central neighborhood right next to campus and we include in our ads that the owners live next door.  Real partiers do NOT want to live next to the landlord and will self-select out. Responsible people who want quiet don't mind.

We do the 12 month lease that grantmeaname suggests.  You're right you'd have a competitive advantage if you didn't include summer, but usually only undergrads care about that.  Grad students are staying all year anyway. 

I can think of two other disadvantages of the moving up each summer idea.  1-you'd either have to rent it furnished or move every summer. 2- most of the work with rentals comes when people move in and out, finding new tenants.  It's MUCH less work to keep someone for 2-3 years.

That said, I also met someone here who owns a house on the lake.  She rents to students for 9 months and gets a rental downtown for herself, then moves in for the summer.  I thought that was a brilliant way to get someone to buy a lake house for you.

[Argyle]

It would be a hassle to move upstairs every summer and then back down in the winter.

Would you have the same entryway as the renters?  Would you need a lock on the door to your part of it?  Because not all of them are honest.

A basement can be dreary, dark, and chilly, especially in the winter.

I'd go for a duplex or a property that has two separate small houses.  A friend I know who does this does not rent to undergraduates -- they leave damage like holes in the walls and doors, not to mention having trashed the place one too many times.  Even if you're there most of the time, spend one night out of town and you could come back to more damage than their deposits will cover.  This is the voice of experience speaking.

The exception is student athletes, I mean on the university sports teams.  The university athletes are out most of the time, go to bed early, and run a tight ship, because their coaches make them and their scholarships depend on it.

[grantmeaname]

I'd go for a duplex or a property that has two separate small houses.  A friend I know who does this does not rent to undergraduates -- they leave damage like holes in the walls and doors, not to mention having trashed the place one too many times.  Even if you're there most of the time, spend one night out of town and you could come back to more damage than their deposits will cover.  This is the voice of experience speaking.

That's exactly right! All undergraduates are wild party animals and also dishonest scumbags! The whole lot of them are no good!

(Maybe your friend is doing things wrong if the only kinds of tenants he can attract are the shitty ones.)

[tralfamadorian]

The exception is student athletes, I mean on the university sports teams.  The university athletes are out most of the time, go to bed early, and run a tight ship, because their coaches make them and their scholarships depend on it.

I don't agree with the above or the innate destructiveness of undergrads.  I think your ideal college renter is going to be dependent on the school. 

Currently I'm saving up for my second rental property in one of two college towns close to me.  The first is a small private all girls college where I think it's safe to say that the percentage of damage to typical will be on the low side.  The second is a large rowdy state school where depending on the location I may need to factor in a few replaced doors, lots of holes in the walls and much faster than typical wear on appliances into the maintenance costs.  But the rents at the small school are about 70% of the larger.

And the student athletes in the larger school are the worst to rent to out of the bunch.