Is student housing worth it? I think so!!

[Matt McCourry]

K pasa multi family investors!

So after diligently searching the Myrtle Beach SC area for a decent deal I finally came across one in the most unlikely of places....

I analyzed and visited 12 properties before finally circling back to a listing my agent had compiled and put at the very bottom of my multi-family housing search.  

This small community about 20 or so duplex's are strictly student housing.  And when I went to Coastal Carolina University, they were party central.  I mean, it was like spring break in Cancun every Tuesday, Thursday, Friday, and Saturday.  WILD!

Why did I choose it? I was riding around one morning after finishing up completing a wholesale on a SFH when I decided to cruise through the area. I came upon a kid sitting on the patio out front and asked him what he paid for the place each month? His replied "bout $500 bucks dude"

Me, "really?  For the whole side?"

College dude, "naaa man, I wish, thats what I pay for my room"

Me (to myself) "holy smokes!"

College dude, "Yaa its sweet bro, its a steal compared to what my other buddies are paying for crappy rooms in Campus Walk (a huge student housing complex).

After hearing this, I had to take a closer look!

So here are the numbers for both sides per year:

Purchase price: $230K

GSR: $35,640

Repairs and Maintenance: $2915

Utilities: $3265 

Taxes: $2220

Insurance: $2500

MGMT Fees (although I am tackling this myself): $2851

Replacement Reserve: $1000 (for replacement of appliances 

NOI: $19,463

Expected Monthly Cash Flow: $450

Of course I wish I would have gotten it for less, but with an average vacancy rate in this small community running around 4% or lower for the past decade, and with comps' based on the same product selling for $256k, $249k, & $272k, I thought it was a good buy.

Please guys let me know what you think!  All comments are welcome!  Here to learn.

[Mary Ann Nielsen]

All Good Pointers noted previously.   Look at the lease terms.  Are they doing one year leases or are they per the school year.     Do yourself a favor and do a rent comp survey of the area.   Can rents be raised etc.  By renting out each room per unit as a joint tenancy you will realize a higher rent overall per unit.   If leases are on the schools terms you will end up with the units vacant 3 months out of the year and then you are starting over looking for new tenants.   Try to go for at least a year lease.   Upon renewal, opt to take an annual rental amount in the shorter term.  For example:  if the rent is $500.  for 12 months that would be $6,000. divide that over 9 months which is $667. 

I have done where we rented the property for a 12 month lease and they paid a higher amount for 9 months and then a lower amount for the 3 months they went back home and the unit stayed as is "primarily storage where they didn't have to move out"  that saved on turnover.

You may experience a higher turnover and make sure you secure a higher security deposit for damages.  

I just learned of a new website that is cloud based that allows you to manage up to 75 units free.   I haven't had a chance to check it out just yet.    It is www.auth.tenantcloud.com/signup/

It is a tenant cloud based system that lets you manage up to 75 units for free.  You can accept & manage rental applications, store accounting, collect and track rents, manage maintenance requests with tenants, manage websites and a bit more 

If you have any questions please feel free to contact me at 415-640-7905.