Critique This Deal In A College Town

[Patrick M.]

Hi there- I'm in a college market and have the following property in my sights:

Property: 4 br / 4 ba unit, 1250 sq ft, in MF complex with individual lock-able bed/bath suites

Rent: Currently $1650

Target purchase price: $140,000

Monthly HOA Dues: $200

Prpty Mgmt Firm: $165 (10%)

Monthly Taxes: Approx. $200

The complex is relatively new (built late 1990s) and on a direct bus line to campus, where parking is difficult/expensive.

I'm figuring about $1400 a year in capital refurbishment after any improvements that are captured via the $200/mo HOA dues. Look good? What else would you want to know before pulling the trigger?

[Scott Dixon]

@Sharon Tzib

For this type of College Rental in my area I do use a higher vacancy rate for running the numbers (25% = 1 out of 4 bedrooms open). This is because I feel I have little control over filling the unit but this is specific to units which are filled on a per room basis and I don't personally manage.

On the other hand I have a 3-unit college rental which I manage, all units are 12-month leases and not rented by the room. Over 2 years the property has performed with a 2% vacancy which is the 1 week I need to fix and clean the unit between tenants. I have found college rentals to be significantly more hands on but my personal experience has been very positive.

Scott Dixon