Does anyone own rentals in Denton near University of North Texas?

Question

I'm looking to potentially acquire some properties there.

I don't have any colleget properties in my portfolio yet.

I'm curious of your experience.  A few questions:

1) what challenges have you experienced?

2) how well would a 2 Bedroom / 1 Bath duplex (same configuration on each side) rent?

3) how much do you typically get per room?

4) do you do 1 year leases or are you beholden to the August to May school year causing more vacancies than one might typically experience in a SFH rental?

Any other thoughts or suggestions as i work to educate myself on this potential area and type of rental?

Ben Williams · Answer

I bought my first rent home 1.5 years ago in Denton.  It's possible to turn a profit if you buy a distressed property and "flip" it to yourself.

I bought a 3 bedroom, 1.5 bath with garage conversion as extra living space.  Purchase price was $95,000.  I put $25,000 into repairs, but could have saved $5,000 if I had gone with the GC's people instead of my own (at the time I had not quite settled on the GC).  That put me all in at $120,000, and I got 3 college students renting the place out at $1200 a month, meeting the 1% rule.

Now this was two years ago, and the rent has gone up to $1250 with 2 of the 3 students staying with the house and splitting the rent even with the price increase. While it was not a slam dunk deal, I'm happy with it as my first try at this thing.  With the improvements increasing the value of the property, I'm pretty sure I could sell i today for $140-145k, and make a few more bucks.... but as the comments say, the property values keep going up in Denton, so I'll continue riding that wave for now.

Chris Carlson · Answer

We own two properties within 5 miles of UNT/TWU campuses and another 2 just outside that perimeter. You don't state if you are looking for these to be strictly student rentals.

Our rentals are targeted at families or younger professionals that want close to campus/square living but not on campus/square prices. If you choose to rent directly to students I'd be cautious, you have a large base of competition in the bigger properties, they have the mgmt and scale to deal with the younger tenant crowd. The sweet spot in Denton is honestly, IMO, about 5-10 miles outside the radius of campus. We have been investing in that area for the last 7 years and I have talked to a lot of UNT student that live even in the Corinth, Lake Dallas, Cross Roads, Little Elm area.

UNT housing authority (can't reca the dept name at the moment) is actually on record as renting out local private housing to supplement its dorms...the net effect of that could be considered close to rent control...a situation that we originally considered but backed off after looking at the economic growth around the campus and true demographic we wanted to target.

Alfred Litton · Answer

Steve.  I actually work at TWU (and have for 23 years) and park every day on Texas St.!  I own 3 properties (free and clear) in Wichita Falls and two more in Sherman/Denison but none in Denton. Obviously, I've gotten to know Denton and the 2 universities here very, very well in a quarter of a century, and suffice it to say that, while I think a person can do well in this market, even with all my familiarity with it, I have steered clear.  Prices in Denton have simply gotten too high. I cannot make the numbers work here.  It's not as bad as other parts of the metroplex, but it just doesn't make sense to me.  I actually saw a crappy little dumpy house on Schmitz (one block north of Texas St.) go for $160K. 900sf! This house had minimal cosmetic work done.  There is no central AC, and it's still a real dive.  It took quite a while for it to rent and I don't know what it went for, but there's no way it got $1600/mo (1%) which is what one can get pretty steadily in second-tier cities in TX.  There are better margins elsewhere, IMO.  Also, next economic downturn and you can expect some very serious, very major changes in the TX higher education landscape. The move toward consolidating campuses, hybridizing 2- and 4-year schools, delivering educational content online are all going to eat away at residential enrollments.  Why do you think UNT and TWU have been so reluctant to build housing? It's expensive, and they know what direction higher ed is going in during the next 2-3 decades. By outsourcing, they let private providers run all the risk should their enrollment demographic shift toward those who don't have to be in residence here. Sorry to be a downer, but trust me when I say that, a few years back I WANTED to invest in Denton, but for now, I'll pass.

Alfred Litton · Answer

Steve S.  I actually drove by what I think might be the property in question when I went to work yesterday.  It doesn't look bad, but I can't say if it's a good deal or not because I don't know what they're asking.  I've been advising friends to look--for the longterm-- at communities just north of Denton. Sanger, Krum, Ponder, etc.  The growth is headed in that direction, and they are less expensive than Denton. Anyway, all the best!

Nathan Carsten · Answer

We're holding the next Denton Area Investor Meetup January 18th, at 7PM.  It's online, here's the link- https://www.biggerpockets.com/...

Feel free to reach out if you have any questions.

Alfred Litton · Answer

Jessica G.   Denton itself has around 45,000 college students, so it's a HUGE rental market, but I don't think the students themselves like to rent much outside the city with its universities. Instead, it's all the other jobs that are attracted to northern and western Denton county that would be your rental market.  Denton, Sanger, Ponder, Krum, Aubrey area together are pushing 300,000 in population, and that's going to explode in the next decade.  Your tenants won't be the least bit interested in Dallas.  Hardly anyone up here commutes there. It's its own market.  There are some good PMs in Denton to choose from.  I just find the prices a bit too high for rentals in Denton proper, but if you are patient and look around to communities like Ponder and Krum and Sanger, you might be able to find things that you'll be able to rent readily to people who work in Denton (county government, universities, very large medical complexes, etc.) but cannot afford to buy in Denton. That is only going to get more critical as the growth comes up I35W and the Alliance Corridor. There's considerable upside in appreciation with the right homes right outside Denton.  But almost nobody who lives in Denton works in Dallas.  Fort Worth? Yes, some, but not Dallas.

Jessica G. · Answer

@Alfred Litton We are thinking about the locations you listed because we love the 'burbs north of Dallas. Do you think it will be more difficult finding tenants being SO far from Dallas?

Steve S. · Answer

Thank you for your thoughts and I’m liking what you’re thinkin!

Steve S. · Answer

I appreciate the insights. Always helps to talk to locals and people who have been there. I’ve never added any college type housing to my portfolio for various reasons and may just continue to stock pile cash for now

Krishna Chava · Answer

Thanks, everyone for inputs. Great insight into submarket I was interested in 2 years ago.

Does anyone own rentals in Denton near University of North Texas?

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