Investing in "college" towns

These houses went for $10k to $20k in the mid 1990s. Pure cash cow.

great investment around private schools I think. I have a freind that owns a place...he gets rent checks from parents usually paid for the year upfront. probably one the best ways to invest in RE.

Do you mean private colleges? What specifc areas are you talking about?

I have also thought about doing this, I think New Paltz is a good choice. I have spent a lot of time up in that area since the 80's. My only concern would be the wear and tear issue. I have seen some of these student houses and they take quite a beating. Seems that the owners just paste them back together each year when new crop of kids come through.

Getting the guaranteed rent from parents is a real plus. I think you would need to find the right place and have a good builder "college proof it" with some sort of modular design that can be easily (and cheaply) put back together.

Me too... I better buy bf you guys get a jump on me....

OMFG.... where's that broker's #?

You know Ferarris GTOs have been a great investment.. I better bid $25MM....but I don't got $25MM... let's make a coop to purchase it....

Next, how about some Picassos?

Next, how about some French castles?

Next, how about some GOLD?

Next, how about some Pets.com?

Let's just hold onto something and hope it makes us RICH!!!??!?!!!!!!

WTF AM I WORKING 40hrs for?

I BETTER GET INTO HARVARD so I CAN GO PLAY FOR THE KNICKS!

W67: Sure, why not? I'm only posting about RE because this is a RE board. You mean it's not a good idea to speculate on Picassos? Or undiscovered artists :)

Not necessarily private colleges - just college towns where there is a strong demand for student housing. Some colleges can accommodate all students on-campus. New Paltz came to mind because SUNY is there, and they definitely don't make a mission to provide all student housing.

Here's one: bid 150k cash, I say.

http://www.weichert.com/38388541/

Oh, and take out the oil heat and let the students pay for electric baseboard heat. I know I did as a student :)

http://www.randrealty.com/NY/Property/956826/10-Orchard-Lane-New-Paltz-NY-12561/

I always thought the investing in RE in college towns made sense until I had a good friend try it. He bought two 5 bedroom homes (3 bedrooms upstairs; two in the basement). He would rent to 5 kids. All was good until the old-time non college neighbors decided the college kids were too rowdy. They got the city to start enforcing an old law (that was designed to stop brothels 75+ years ago) that said no more than 3 unrelated people can live in a house.

I've also heard of cities taking action b/c the bedrooms in the basement are not "legal" bedrooms and therefore can't be used as such.

The point I am making is to find out if the there are any movements going on in the town to try to crack down on the college students. My friend ending up loosing a good amount of money on the two houses b/c once the city started enforcing the old laws, he could only rent to 3 students and not 5 but three students wouldn't pay the same rent that 5 had paid before. The value of his houses decreased by a good amount.

On other point if you go forward - get a good management agency. It will be well worth it. They will find and screen your tenants, go after the tenants if the rent is not paid, etc. Also, you don't want to get a call at 2am that the toilet is clogged. And if you did want to deal with it, it might cost you $250 just to have a plumber show up; a management company will have one on staff and might only bill you $75. I recall that my friend told me the management company took about 10% of the rent. It took away a good amount of the profit he was making (when he actually made a profit in the good years) but he said it was well worth it.

Just a few thoughts to consider.

Let's take the 42 Church listing @ $300K and $3400 rent roll at face value => $41K rent.

- 15% vacancy allowance => $6K
- 10% management fee => $4K
- taxes => $7K
- insurance & maintenance & upkeep & utilities => $6K
- amortization of transaction costs => $3K

So $41K gross income minus $26K expenses, a net of $15K on a $300K investment.

- assuming you finance the full thing at 6% for $18K, you're looking at negative carry
- assuming you pay cash, you get $9K after-tax for your $300K and labor

90% cf goes to pay monthlies. 10% goes to mgmt co.....

Providing cheap housing to college frat boys after subsidizing college sports team $1mm salaries and professors $500k pensions! Priceless.

Which is why 300k is too much to pay. And convert to electric heat so utilities go down.

The listing says tenant pays all utilities, so the electric heat reference shouldn't change anything. Given the likely maintenance of a house with 10 fraternity brothers living in 5 bedrooms, it probably would not make sense to think about this without several properties to amortize the cost of managing them from afar. There definitely is risk, as others mentioned above, that a backlash on student housing or a significant investment by the school in on-campus housing could make these un-rentable, particularly in a place like New Paltz where the rent probably would be 50% cheaper without the college kids.

I have a great nephew who is a police offer in a city in the south west. He could be a landlord because he could do it in his "spare" time, he can find contractors who will "work for cheap", and it shouldn't be a problem for him to "collect the rent". That makes sense to me for an individual ... someone local, who knows the local rules, and who has the time, energy and motivation to get all of the dirty work done. As for others being individual landlords ... not sure.

"and professors $500k pensions!"

I'm guessing you don't know a lot of professors.

He was a TA in business school.

nyc10023: have you looked around Bard? i think the RE in that area has not been faring well. Not a state school so parents probably have some cushion plus lots of graduate programs at Bard. You would think grad students would be kinder on the house.

It is too risky an idea for me. Besides the headaches, I imagine the insurance would be quite high for what is a commercial enterprise. I would check out insurance requirements. They are very different in each county.

apt23: everything is risky unless you got in 3 years ago in stock market and out again recently! Or bought Con Ed.

That's apt23's point. She's scared of everything.

not everyone can be as nacho as you---the sheriff of hunters burg.

nyc: I evaluate risk by headache factor. When your stock blows up, that's it. Money gone. Clean up involves waiting till the class action law suit shows up and you sign your name on dotted line. When the rowdy college student freebases and blows up your investment property, your problems begin --clean up, law suits, etc.

That said, my aunt and uncle were both college professors and saved every penny to buy local housing to rent to students. In their later years, they made four times their salary thru the rentals. And they left a very nice RE inheritance for their kids.

hburg, good point about being local and having a job with a lot of time to spare. Essentially, if you can put sweat equity to manage your property and count that as earning from real estate, it may be a good investment.

>columbiacounty
about 2 hours ago
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not everyone can be as nacho as you---the sheriff of hunters burg.

I'm so nacho! Pass the nacho cheese sauce.

apt23
about 2 hours ago
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>That said, my aunt and uncle were both college professors and saved every penny to buy local housing to rent to students. In their later years, they made four times their salary thru the rentals. And they left a very nice RE inheritance for their kids.

So your cousins have more than you because your aunt and uncle were smarter than your mom and dad. And you are apparently jealous and bitter. Must suck every holiday.