First Deal Near A College Campus

[Kyle Alberry]

Hello Biggerpockets community!

I have read about 90% of the blogs and articles as well as read Rich Dad, Poor Dad as well as ABCs of real estate, and almost ALL the information I can find on the internet. I am only 19 years old and I am a sophmore going to college in Brockport, NY. I believe a great first investment would be near the campus for many reasons. It will be owner occupied (if not by me, then by my partner because I may be moving away after this year). It is fairly easy to rent out because it is close to campus and there's always a demand for rentals near a college campus. We will rent it out to our friends for 2 years after we buy until we graduate. I will go half and half with my friend who does not have as much real estate intelligence as me, but he works well with his hands and we can split the down payment.

Now for the actual deal:

There is a recently flipped single family home that has 4 bedrooms and 2 bathrooms. We will rent out the bedrooms seperately so it is sort of like multi-family. It was bought in 2012 for $53,000, and is listed now for $86,500. I feel like we can negotiate down to between $75,000-$78,000. If it is indeed $75,000 it will be a $15,000 down payment at 20%. That means at 5% the mortgage would be $322.09 per month with property insurance being between $2,200 and $4,500, so I just averaged them. That would be about $267.

The total monthly payment without utilities would be approximately $589.09.

We were thinking rent would be at approximately $2,200  per unit per semester. That is the going rate for houses around this area at about the low side, so I do not overestimate. If me and my partner live in the unit and rent out the other 2, then our gross rent would be $4,400 per semester, or $8,800 per year. With our mortgage and property tax being at approximately $7,069, that leaves about $1,731 for utilities, insurance, maintenance AND we will not be paying anything for rent ourselves, so we could probably toss a couple dollars in if we needed to because we would be living for free anyway. We would also have about $2,000 per year in equity in case we would like to cash out sometime in the future. The cash on cash and cap rate would be low, but if we graduate/move and decide to rent out all four units, that would double our gross rent to $17,600 per year and leave more cash flow for us, minus the 10% of rent per month or so that would be needed for a property manager since we would not be in the area.

Though having this all thought out, I plan on calling the real estate agent tomorrow to talk to them about the deal, and I am going to start looking at finance options. Since we are college students, we probably will not have enough credibility for a bank loan, so we will hope for seller financing or a private lender.

If you all would be so kind as to give me some advice, a next step, if I'm missing something, or if this deal is not as good as I think that would be much appreciated.

Thank you very much,

Kyle