College area investing

[Matt DuSold]

Does anybody here rent in college areas? It is looking like I will be spending much of my life here in Columbia, Missouri. I have always wanted to have a strong buy and hold portfolio I just don't know how much more risk will be involved.

When doing rentals in college areas do you need to use something like a 55% rule? I know the rule is just a rule of thumb and it really is whatever work for the investor but I didn't know if anyone had any experience. I know expenses will be high but I do feel there are plusses to investing in the college area with being able to constantly have a demand and getting your rent from the tenants.

Any help or word to the wise would be awesome!

[Mark N.A]

College rentals is almost a 'specialty niche'. And in a way can be similar to renting to low-income tenants (who often don't work, have no sense of responsibility, etc.).

First off do your due diligence about the school as the rate of colleges going out of business is rising. If the college seriously shrinks or goes out of business you will not do well.

Finding cash-flowing prices in this area is hard, because close-to-college property is like waterfront property. Plus, you've got competition from well-heeled parents buying for their kids, and fuzzy-math investors who think that if the rent covers the mortgage they are doing swell, especially when they add in 'appreciation'.

Keep in mind this crop of kids is the most spoiled I have ever seen and they all feel super-entitled. In addition to the sand volley-ball courts they want heated pools plus private baths for each bedroom plus high speed internet, etc. All of which and more is offered by new construction. So -- as has been said already -- you need great location.

Lastly, though I could go on, get all their parents to sign notarized guarantees. And keep the parents in the loop. And photograph everything before Jr. moves in, as well as have them all sign a move-in inspection.

And understand that while these kids can vote and own guns and drive cars and drink, they're still just kids! Usually in all the worst ways when it comes to your rental!

Good luck!