A rising tide raises all boats....
Come back after you have owned this property for 15 years and show us the complete set of numbers over that time. If the house appreciates 3 percent compounded over that time and you net 5 percent annually over your holding period, you will have pretty much matched the stock market. You will have sheltered the income to some extent, which is helpful.
My opinion is still that you are taking on a lot of risk to buy mediocre investments. Dial down the risk and be careful with your purchases, and you may be ok. You won't make millions, but if you also fund your retirement accounts, you will have multiple sources of unearned (at least in the tax sense) income.
While you are waiting, join your local REIA and browse the forums at Bigger Pockets. Read a few of the books on Arebelspy's reading list. Make friends with other investors in your area that are income oriented and see what they do that is different. The education is cheap, and if you avoid an expensive mistake or two, well worth the investment.
I will accept mediocre and move on. I will just have to post my numbers as they come in. My timeline was always at least 10 years.
I am not trying to win the argument either, but trying to share information that may be helpful to others. My main argument for this discussion is that people should try to find value in what they already know. I have lived in a college town or near a University for pretty much my whole adult life. Based on this life experience, I gained knowledge on college rentals. There could be better ways to make money, I am comfortable and understand college rentals. I have some room for improvement and have already gain a lot of things to consider from the MMM website and forum, including book recommendations.
I would argue that I did a long analysis before buying. I was accept to 5 different PhD programs and picked the school with the best opportunity for a college rental. However, some of this analysis might be unconventional. Every college is a little different, so I think it's important to learn about the local culture. I spent a little less than a year talking to people on where they lived, why they liked it and how much they paid. I then compared the different neighborhoods around campus based on purchase price, likely rental price and long term neighborhood development. I guess long term development is called speculation. However, most colleges print a 10-year master development plan every 3-5 years. I believe this provides valuable information for college rentals.
One example is that the school is having a hard time paying the bills with state money. As a result, the school is trying to recruit more out of state students that would pay the higher out of state tuition costs (26K). The total number of out of state students was around 15-20% in 2007 and now it's 25%. This has resulted with a small and steady influx of higher income students. Enrollment was predicted to go up and the University is unable to build more housing on campus.
I learned that most students want to live within biking distance. The number of bikes on campus is mind blowing. I also learned that the typical path for most students at this University is dorm for the first year, apartment for the second year and a house their 3rd and 4th year if they are lucky. Not all students get the experience of living in a house due to the limited supply of single family homes within biking distance. A few parents buy condos for their kids, but often want to sell when their kid graduates. This typically results in a large number of condos for sale every year. The initial numbers look good, but there is very little appreciation because there are always a large number of parents competing against one another to dump their condos.
I decided on looking for a single family home within 1 mile of the west side of campus. The neighborhood doesn't have large price fluctuations. However, there was a small dip in price in 2007 due to funny financing and a few people lost their homes. I bought the 4 bed/2 bath foreclosure in 2007 for 182K that was only .6 miles away from campus and ridiculously close to a campus bus stop. Based on comps the bank first listed at 218K. But because it was ugly on the inside they didn't have any takers and dropped the price 10K every 3 months. When listed at 188K, I got it for 182K. Based on public records for similar sized houses, I would say only maybe 10% of people bought lower than me. However, its not really all that impressive to brag about buying near the bottom, because the bottom wasn't that much of a discount. There is currently a housing squeeze near campus that was somewhat obvious based on current trends.
For my current Florida house, I have many points, but I will only list 4. One, there is no affordable housing near campus, but students don't ride their bike, they drive. I am 4.5 miles away from campus, but that is not a problem.
Two, most neighborhoods near campus are gated with occupancy limits and ridiculous rules. I live in the only non-grated community near campus. Each year more students move into our neighborhood because their is no gate, no HOA or ridiculous rules. The school is growing with increasing numbers and also a shift from commuter students to more traditional students wanting to live near campus. The percentage of college houses is around 10% right now. I anticipate this being around 25% in 10 years. As more students choose to live here, it will slowly become the place were everyone wants to live and college bars will start popping up on the outskirts of the neighborhood because retail is also very close. The 10 year master plan of the school specifically says that my neighborhood will experience the largest impact for housing demand from students and employers at the university.
Three, because my neighborhood is non-gated and non-HOA, the neighborhood looked really bad with the high grass and weeds from many lawns of empty houses about 3 years ago. All neighborhoods seemed to have about the same percentage of foreclosures. However, HOA neighborhoods didn't look as bad because they had money to clean up and cut the grass. When you look at the housing data for my neighborhood, the median house price has typically been about 10% above the median. After the crash, it was 20% below the median. I predicted that when things recover and the houses are no longer empty, my neighborhood will recover faster. Three years after my purchase, my neighborhood is now 1% above the median.
Four, the headquarters for Hertz is relocating from New Jersey to 8 miles south of my house. This is a multi-phase project with a lot of jobs coming to town over the next 10 years. This will also put a squeeze on local housing. They are about 6 months into building phase 1, which I think will take 2 years. This was announced 1 year after I bought. I strongly believe that the Hertz relocation was 100% luck. However, I would argue that the rest of it was not.