Does anyone have a monopoly?

Question

So a two years ago I started buying some rentals across from the college in my town. It started as one house and then before I knew it it turned into 6 out of my 10 rentals within a block and a half. So now I kind of control the rents in the area, I control most of the comps and seem to have a pretty good thing going. An average deal for me in this area has been purchase for 70 k (after repairs) and rent for between 1000 and 1200, mostly to students. My latest purchase was a duplex on the block for 88 k and I immediately raised rent to 1325. Anyway the school has bought 4 houses on "My Block" in the last two years and rumor is they are going to start knocking them down for eventual university expansion. A 3 bedroom just came onto the market two houses down from one of mine, I think I can snag it for 65 k, it rents for $875 right now but should be $975. Am I getting carried away or should I lock up a monopoly on this block? There are some better deals that come up at the auction but this should be solid right? Its in good shape. Has anybody else controlled a whole block or neighborhood? How did that go? I just love looking down the block and seeing 5 of my for rent signs (even though I only have one vacancy I leave the signs up).

Brandon Ingegneri · Answer

There is a company near me that has over $150 multis around one particular college.  They pay a premium for the properties, renovate them beautifully, and brand them.  This particular college is expanding and increasing dormitory space.  Here is the thing though, students will always want to live just off campus...especially if it is dry.  I think it is a winning formula, and after seeing the expansion of this particular company that has invested literally millions and millions of dollars into the property in the area, I'd say keep growing until you can't anymore.  Someone else will if you do not.

James Wise · Answer

You try getting a screenshot of the image than saving it in paint. Always works for me on weird files that won't upload.

Nicholas Spohn · Answer

@Kevin Kroll I don't have all students, there are always people looking to rent a decent house at a fair price so I think I will be ok, but yes the university can't really expand anywhere but my direction. I do a good job of maintaining the properties and 3 of them were vacant and dilapidated when I bought them and I think people in the neighborhood recognize the improvements.  While I buy them for cash flow the potential of the future buyout is nice kicker. @James Wise the last one I bought was a 70k owner financed that needed no work and I just filled it for 1100. My first owner financed deal! The seller happened to use the same banker as me so I got a glowing referral. I don't know about the rest of you but I would do that deal all day.

Nicholas Spohn · Answer

Thanks @Brandon Ingegneri, That is the confirmation I was looking for! I don't think $900 in rent on a $65,000 house is homerun, maybe a sacrifice bunt : ) but it gives me economies of scale and an even bigger brand in the area. I think I can rig it to put no money down too. @James Wise that is what I am trying to do, I just got my signs made, I was going to post it here but Im not sure if I can, or if I should (I'm not pro yet) but they look awesome! I feel like I am building a real business!

Michael Noto · Answer

Don't overthink this.  There is absolutely no down side into having a block of homes in the same area. Especially if that area is quality and there is a demand for good people wanting to live there.

Brandon Ingegneri · Answer

correction.  not $150

over 150 multi family properties.

Nicholas Spohn · Answer

ok you guys are missing the point here. For one its a lot of students so the units turnover around the same time each year. Second I don't always leave them up but I do leave extra signs out if I have one vacancy. My house I live in is on the busiest street in town so I leave a sign out there to fill a rental that is not on a busy st. Works like a charm. Plus I help my friends fill their rentals whenever possible. But the post was about getting a monopoly in an area not yard signs! Thanks for the feedback @James Wise

Jason J. · Answer

I agree with the others about the signs. If I was looking for a place to rent and saw all the signs up and down the street I would assume they were all empty. Then I'd wonder why no one wanted to live there and question if there was something wrong with the area that I wasn't aware of.

James Wise · Answer

I am a big fan of buying them as close together as possible and creating a monopoly of the area.

There is a street called Behrwald in an area we are most active. We operate 12 rental units on Behrwald (2 SFR & 5 Duplexes) It is nice having everything so close together.  When tenants are looking at rental properties they usually have a neighborhood they want to live in. If you control the majority of that inventory you have more leverage.

It can also help with marketing to sellers if you have everything very close by. There is a strip of apartment buildings running down a main road in our neighborhood. They range from 6 suites to 15 or 20 suits. We have 5 buildings in that strip. We do direct mailings to very tiny targeted areas. 100 letters or less. Sometimes just to the owners of buildings only on that strip. We personalize these letters and give out the addresses of the other buildings we have right near their buildings. The sellers respond to these very well compared to the response rate you would get with a large mailing list and a generic letter.

Steve Vaughan · Answer

Nice!  I like being a big fish in a small pond, too.   Could be a little scary (what if funding stopped, the college moved, whatever) being so dependent on external forces for me, but sounds like it's been good for you!  I'd pick it up if it fit into my overall plan, sure, @Nicholas Spohn!

Question - why do you like the extra phone traffic from prospective renters when you don't have vacancy? Just curious.  For Rent Signs up and down a street? Not the most attractive thing.  Thanks!

Does anyone have a monopoly?

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