Author Topic: College-Town Real Estate Investments.  (Read 893 times)

naftrid

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College-Town Real Estate Investments.
« on: April 02, 2019, 12:48:16 PM »
Hey all,

I would like like to see some more professional opinions on this matter:

I live in Murfreesboro, TN. And it's definitely a growing area, apart of the Nashville metropolitan area. But mainly, it is a college town. MTSU is a huge school with prominently commutes and people that live in the many near apartments. There are a lot of new constructions going on. There are a lot of new (2018-19) 170k-ish houses coming onto the market. They are effectively condos with 2 bed, 2.5 baths. Additionally, there are plenty of 150k-ish older homes for single families. with 3 beds etc.

I am going into my senior year of college myself. I hate the idea of paying rent. (in this area 800-1.3k/m rent for apartments) I am interested in the idea of buying one of these close to campus homes, and effectively paying a mortgage (same cost as rent after adding taxes/insurance/etc.). And although I don't intend to live there for 5 years, I thought I could rent it out in a year or so to fully cover mortgage and make profit. I could even move in now and have roommates and still cashflow and pay towards my principle.

My credit score is 720+ and I have credit history of only 4 years. I have enough cash to do a  20% down payment. I am just wondering if this is the best investment. I have an interest in real estate and  financial investing. Should I use my cash elsewhere and put out the 800/m rent or put it towards a house that I could eventually cash flow from. Or would the rate be too high as I am only 21 with limited history.

MTSU is not going anywhere and the area is growing fast, I think that the home's value would increase as time goes and will always be in demand. Apartments/houses fill up quick here in Murfreesboro.

I would like your opinions and ideas. And if you have a questions I could answer them.

Sugaree

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Re: College-Town Real Estate Investments.
« Reply #1 on: April 02, 2019, 01:08:27 PM »
Check your zoning laws.  I live in a college town.  There is a very nasty divide these days between townies and the university.  Most residential neighborhoods have been zoned to not allow more than 2 unrelated people living together (three if one is the owner).  This is widely known as a way to keep college kids out of the neighborhoods.  Even in the aftermath of a tornado that destroyed ~1500 dorm rooms and private student housing, the city council declined to relax the zoning even for a year.  It wasn't always this way.  For years, people in the neighborhoods were encouraged by the mayor and city council to build what would be called an in-law suite or a granny pod now and rent to students.  There are two on my block alone that can no longer be rented out due to new zoning. 

clarkfan1979

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Re: College-Town Real Estate Investments.
« Reply #2 on: April 02, 2019, 03:27:16 PM »
If the college is expecting to have enrollment growth of at least 1% each year over the next 5 years, I would do it. I love college rentals. The numbers are not super sexy to start, but it can be very good for the long game.

My college rental that I bought in 2007 was 20% down on 182K with 10K of immediate repairs. 36K down payment, 4K of closing costs and 10K of repairs puts me all-in at 50K. Original mortgage was around $1,000/month. I recently did a cash-out "re-fi" and pulled out 145K to purchase another property, so my current mortgage is $1,600/month.

Original rent in 2007 was $1250/month. Rent is currently $2325/month. Rent will be increased to $2500/month on August 1, 2019.

Repairs are normal. Vacancy has been 0% over the past 12 years. Average tenant(s) stays for 2 years.

When you get 3 parents to co-sign, I would consider it to be a good lease for a landlord to have.

SwordGuy

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Re: College-Town Real Estate Investments.
« Reply #3 on: April 06, 2019, 08:14:54 PM »
@clarkfan1979 , I would absolutely love a link or book recommendation on how to rent to this market. 

I'm doing SFH and would like to branch out to a property like you are discussing.

FINate

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Re: College-Town Real Estate Investments.
« Reply #4 on: April 06, 2019, 10:12:44 PM »
I'm in the middle of remodeling a former college rental. It can be lucrative, but be aware that students can be tough on a property. In hindsight I should have done a more thorough inspection at least 2x/year, if not more. None of my tenants were malicious, but many are more-or-less still teens and they don't tell you when something is wrong such as water intrusion or a leaky pipe. Finding lots of issues now that would have been small fixes early on but are now costly repairs. Also, had other minor issues such as pests because they were leaving out food and such, and unregistered cars in the driveway. So yeah, they can pay well, but expect to be more hands-on.

clarkfan1979

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Re: College-Town Real Estate Investments.
« Reply #5 on: April 07, 2019, 11:02:42 AM »
@clarkfan1979 , I would absolutely love a link or book recommendation on how to rent to this market. 

I'm doing SFH and would like to branch out to a property like you are discussing.

Thank you for the encouragement. Unfortunately, I do not know of any books specifically for this market. Does anyone else know of one? If not, maybe I should write a book?

There is one podcast on biggerpockets on college rentals from 2015 or 2016. I think the guy started buying SFH near University of Oregon in the early 1980's. I agree with 75% of the advice. If you Google his name, I think he has some you tube videos as well.

There is also a few threads on college rentals on bigger pockets and I contributed to a few of them. I think there is a lot of misinformation regarding college rentals out there, mostly based on stereotypes, from people who do not own college rentals.

I teach college for a living and have lived in college towns for the majority of my adult life. As a result, I think I have a competitive advantage for market conditions and selecting tenants. Like anything, if you do it well, you can make some money.

I would target Universities that have plans for growth with enrollment and bringing in outside money. R-1 institutions (more research) typically grow faster and bring in more money than R-2 (more teaching). Most Universities have a 10-year master plan for growth that is posted on their website and is accessible to the public. I would read it.