Looking to buy! Need advise from all you pros out there!

[Travis Hintzel]

Hey everyone,

I'm looking into buying my first property. I met with my banker the other day and I know what I can afford. I'm looking in the 80k (give or take 10k) range. My idea is to purchase a home in a college town that is 3-4br. It is pretty common in this particular college town for students to rent a house, or just a room in a house with several other students living there. The cost of living in dorms and apartments is high, and I would be offering a much lower rent than any apartment could offer. The demand is there, and it would be a great deal for all parties involved. Comments with experience on this is invited.

In my search, can you all give me some ideas of what I should avoid? How do we feel about townhomes? I see some that have been posted for over 150 days and they seem to be underpriced. I cant help but wonder why that might be. Can anyone address this?

The saying that I've read on this forum is 'You make your money when you buy the house.' With that in mind, how can I get a good idea of what the house is actually worth? What kind of offer can I get away with making? 10% less than asking price? 20%? I don't want the seller to walk, but I do want to get a good deal.

Thanks in advance for answering my noobie questions! :) Please feel free to post any links to other discussions that answer this. I am trying to take in all the information that I can to make an informed decision.

[Matt R.]

Sounds great Travis. Double check any townhomes association rules to make sure it could fit in your plan. I think student housing is a mini goldmine but does require more work with turnover and wear. From the places I know it is virtually guaranteed to work.

Thanks,

Matt

[Cameron Sharp]

Market comps are the best way for finding value. Get that from a realtor.
Consider with town homes and condos you will most likely be paying HOA fees and that can impact your cash flow.
Check the rules with the HOA to make sure they allow rentals and what the rules are. Sadly some investors overlook the rules of an HOA and that can kill a deal. We bought a home in a PUD with an HOA, and the HOA rules limited what we could do in a rental scenario.

Lastly, make sure you know all the expenses associated with the property and what you will pay vs. the tenant.

Good luck

[Aaron Montague]

@Travis Hintzel

Make sure you decide on exactly what you are buying. Formulate a business plan at least in your head, preferably on paper. Make sure it has numbers attached.

"I will buy a 4 bed/2 bath house that I will rent to undergraduate students at $450/month per bedroom. "

Or

"I want to make at least $400/month after all expenses. I'd prefer to rent to grad students in a townhouse within 3 miles of campus."

That isn't to say those are viable number in your area, but they represent good goals. You'll have to shakeout the exact numbers in your area.

A couple things I learned from my time owning student housing:

Always get the parents to co-sign AND explain what the damage deposit is for.

Always get the largest damage deposit your state allows.

Be visible at your properties. Mowing the lawn is a good method of being seen without directly intruding on the tenants business.

Get 12 month leases and allow sub letters.

[Travis Hintzel]

This is all great stuff guys. Thanks so much for the replies.

Tomorrow I am going to check out some landlords who are already doing the same thing and look into what they charge for rents and how they set up payment for utilities (if included or paid by tenants). I will definitely check the HOA rules on renting the townhome before moving on a deal. The only problem that I think that I may have is that I may need to furnish at least the common area. Anyone have any takes on this? I could understand having the students furnish their own rooms, but it would be a tough sell trying to get people in there with no furniture in the common area. I even considered offering a rent rate unfurnished around 450 then maybe a furnished rate around 500, if it makes financial sense. I'm not trying to make a killing on the cash flows. I am in it for the equity and the appreciation.